I.I13RARY 

or  Till' 

UNIVERSITY  OF  CALIFORNIA 


.Q.55.75. 


6 


TAXATION  OF  CORPORATIONS, 


REPORT  ON  SYSTEMS  EMPLOYED  IN  VARIOUS  STATES. 


PREPARED  UNDER  THE  DIRECTION  OF  THE  INDUSTRIAL  COMMISSION 

BY 

G-EORGKE    CLAPPERTOlSr, 

EXPERT    AGENT. 


CONTENTS. 


Letter  of  transmittal:  Page. 

Review  of  conditions 7 

Massachusetts: 

Poll  tax 11 

General  property  tax  _ 11 

Mortgages 12 

Personal  property .' 12 

General  corporation  tax _ _ 14 

Railroads . . 17 

Summary  of  results _ . . 17 

Street  railways _ 17 

Banks ., 18 

Trust  companies 19 

Insurance  companies 19 

Inheritance  tax _  20 

Liquor-license  tax. _ 20 

Nature  of  personal  property  taxed _ 21 

Recommendations  of  the  tax  commission 1 23 

Minority  report ___  24 

Report  of  the  legislative  committee- 25 

Connecticut: 

Property  tax 29 

Property  directly  taxable _ 30 

State  revenues 32 

Railroads 32 

Tax  on  nonresident  stock _ _.  33 

Domestic  insurance  companies 33 

Foreign  insurance  companies 33 

Savings  banks _ 33 

National  banks _ _  33 

Telegraph  and  telephone  companies 34 

Express  companies _ 34 

Charter  fees  on  capital  stock 34 

Investment  tax _ _ _ .  34 

Military  commutation  tax _ ._ 35 

Inheritance  tax _ 35 

New  York: 

General  property  tax _ .  _ 36 

Real  estate 36 

Personal  property 37 

Taxation  of  corporations 40 

Special  franchise  tax _ 40 

Organization  tax _ 41 

License  tax  on  foreign  corporations '. _ .  41 


4  CONTENTS. 

New  York— Continued/  Page. 

Capital-stock  tax  on  corporations 41 

Transportation  and  transmission  companies 42 

Street  and  elevated  railroads 42 

Water,  gas,  and  electric  companies,  etc 42 

Insurance  corporations 42 

foreign  bankers 42 

Banks 43 

Taxation  of  railroads _ 44 

Excise  tax  on  sales  of  liquor _ 45 

Transfer  or  inheritance  tax 46 

Report  of  the  joint  committee _ _  46 

New  Jersey: 

Local  taxes _ 48 

General  property  tax v 48 

Deductions  for  debts 49 

Boards  of  equalization  and  review 49 

Taxation  of  corporations  _ 51 

Incorporation  fee 51 

Franchise  tax _ 51 

Tax  on  gross  receipts  or  earnings 51 

Franchise  tax  on  capital  stock. 52 

Special  franchise  tax ."_ 53 

Local  taxation  of  corporations 53 

Banks 54 

Railroad  and  canal  companies 55 

Inheritance  tax _ 57 

Liquor  licenses. 57 

Pennsylvania : 

State  taxes 58 

Bonus  on  charters 58 

Tax  upon  capital  stock  _ _ . 59 

Tax  on  loans  of  public  and  private  corporations. 60 

Tax  on  gross  receipts  of  corporations  . 61 

Tax  on  premiums  of  insurance  companies 61 

Tax  on  bank  stock . 62 

Tax  on  net  earnings 63 

Building  and  loan  associations 63 

Excise  tax  upon  express  companies 63 

Railroad  taxation . 64 

State  tax  from  counties 64 

Tax  on  collateral  inheritances 66 

Tax  on  direct  inheritances 66 

Tax  on  writs,  wills,  deeds,  etc 66 

Licenses --  66 

State  taxation 67 

Merits  of  the  system 6? 

Recapitulation  of  the  State  taxes  on  corporations  _ -  -  -  68 

Ohio: 

General  property  tax 

Real  estate 72 

Personal  property --  7% 

Listing  system  _ - 73 

Corporations  in  general i - 75 

Banks..                                                                                                    75 


CONTENTS.  0 

Ohio— Continued.  Page. 

Foreign  insurance  companies 

Railroad  companies 

The  Ohio  tax  commission's  report  on  railroads 

Telegraph,  telephone,  and  express  companies 

Sleeping,  palace,  chair,  dining,  and  buffet  cars,  and  freight  line  and 

equipment  companies 

Excise  tax  on  electric  light  and  gas  companies,  etc  ... 

Collateral  inheritance  tax 

Liquor  and  cigarette  taxes 

Indiana: 

General  property  tax 

Personal  property -  -  - 

Corporate  taxation — - 

Rate  of  taxation 

The  Indiana  system - - 

Abstract  of  tax  duplicates  from  1878  to  1899  ...                                    ...  100 

Michigan: 

General  taxation  system - 103 

General  property  tax  exemptions - 103 

Personal  property 104 

Listing 

Board  of  State  tax  commissioners 105 

Banks - - 105 

Corporations  in  general 106 

Specific  taxation  system 108 

Railroad  specific-tax  law 108 

Express,  telegraph,  and  telephones  companies 115 

The  Atkinson  law  of  1899 - 116 

Insurance  companies . . •  117 

River  improvement  companies _ - -  117 

Mining  companies 117 

Road  companies 118 

Franchise  fees - 118 

Liquor  tax 118 

Inheritance  tax _ 118 

Illinois: 

Constitutional  restrictions 119 

Local  assessment  system  _ .  _  _ _ 120 

Personal  property 120 

Mutual  building  and  loan  association  stock 122 

Property  of  banks,  bankers,  brokers,  and  stock  jobbers 122 

Pawnbrokers 122 

Capital  stock  of  corporations  and  franchises  of  persons 122 

State  and  national  banks 123 

Railroads  .  _ 123 

Telegraph  companies _ 125 

Insurance  companies 126 

Inheritance  tax _ .  126 

Assessment  of  property _ 126 

Inequalities  and  iniquities  in  assessment 127 

Assessment  of  the  capital  stock  of  corporations 128 

Personal  property  assessed  in  1890 - 129 

Illinois  tax  commission..  132 


(3  CONTENTS. 

Wisconsin:  Page. 

General  property  tax 134 

Liquor  license  fees _ 137 

Poll  tax _ 137 

Defects  in  the  property-valuation  system 137 

Taxation  of  notes,  bonds,  mortgages,  and  other  securities 139 

Taxation  of  corporations _ 140 

Railroads 140 

Sleeping-car  companies. 143 

Freight-line  companies  and  equipment  companies 144 

Express  companies  .  _ 145 

Telegraph  companies .. . . ,  146 

Telephone  companies _ 147 

Street  railway  and  electric  light  and  power  companies 147 

Gas  and  water  companies * 147 

Trust,  annuity,  and  guaranty  companies - 148 

Banks.. 148 

Title  guaranty  companies 148 

Boom  companies, etc  _ _ ._ 148 

Plank  and  toll  roads _ 149 

Fire  and  navigation  insurance  companies 149 

Life  insurance  companies 149 

Casualty  companies 149 

Summary  _ . 149 

Report  of  the  Wisconsin  State  tax  commission 150 

Personal  property . 151 

Recommendations  of  the  commission 154 

Iowa: 

Assessment  of  real  and  personal  property 158 

Listing _.  •. --.. 159 

Mortgages _ . . . . 159 

Valuations .. 161 

Banks 162 

Shares  of  corporation  stock . 162 

Stock  of  building  and  loan  associations _  _ 163 

Telegraph  and  telephone  companies -  - 163 

Insurance  companies . 164 

Railroads '. 166 

Water  and  gas  works,  electric  plants,  street  railways 168 

Express  companies  _ 169 

Collateral  inheritance  tax 170 

Texas: 

Real  estate. 171 

Personal  property 172 

Mortgages 172 

Poll  tax 173 

Tax  on  occupations 173 

Corporations -  -  -  175 

Railroads 176 

Express  companies 176 

Other  special  taxes 177 

Banks.. ,  177 

Incorporation  and  franchise  taxes. 178 


TAXATION  OF  CORPORATIONS. 


To  the  Industrial  Commission: 

I  have  the  honor  to  submit  herewith  a  report  or  compendium  of  the  systems 
of  taxation  with  especial  reference  to  corporations  in  each  of  the  following  States, 
viz:  Massachusetts,  Connecticut,  New  York,  New  Jersey,  Pennsylvania,  Ohio, 
Indiana,  Michigan,  Illinois,  Wisconsin,  Iowa,  and  Texas.  These  States  were 
selected,  as  directed  by  the  Commission,  because  of  their  industrial  prominence 
and  the  varied  character  of  the  systems  of  corporate  taxation  therein. 

It  was  found  that  one  feature  common  to  all  these  States,  and  running  through 
all  systems,  namely,  the  general  property  tax,  or  as  it  has  been  designated,  the 
"American  system,"  applies  not  only  to  individual  properties,  but  also,  directly 
or  indirectly,  to  a  greater  or  less  extent,  to  corporate  property  as  well.  This 
observation  is  doubtless  true  of  all  States  in  the  Union. 

For  this  reason  it  was  deemed  necessary  to  set  forth  the  distinctive  features  of 
the  Entire  system  of  taxation  in  each  State  applicable  to  general  as  well  as  cor- 
porate property,  not  only  as  a  matter  of  information,  but  in  order  to  present  an 
intelligent  and  comprehensive  view  of  the  various  methods  for  the  assessment 
and  taxation  of  corporations,  the  reasons  and  principles  upon  which  they  are 
based,  and  their  comparative  merits  and  results. 

While  in  some  States  there  is  a  marked  tendency  toward  the  segregation  of 
corporate  property  from  the  general  property  tax,  and  its  subjection  to  special 
methods  better  adapted  to  property  of  that  peculiar  character  and  reducing  the 
taxation  thereof  to  a  rational  and  harmonious  system,  thus  far  the  separation  is 
nowhere  complete. 

An  effort  has  been  made  therefore  to  present  the  characteristic  features,  the 
merits  and  defects,  of  the  system  in  vogue  in  each  State,  and  in  some  instances 
the  efforts  made  to  reform  it  and  the  difficulties  encountered,  giving  especial 
attention  to  the  taxation  of  corporations. 

In  each  instance  it  has  been  necessary  to  examine  the  taxation  laws,  the  work 
of  legislative  committees  and  appointive  tax  commissions,  and  a  mass  of  public 
reports  and  records  in  order  to  present  intelligently  the  system  of  taxation  exist- 
ing, that  your  Commission  might  in  the  end  have  a  basis  for  suggestions  and 
recommendations  as  to  changes  and  reforms  in  the  State  systems,  and  as  to  inter- 
state action  with  a  view  to  uniformity  of  taxation  methods  applied  to  corporations. 

This  investigation  has  necessarily  been  somewhat  tedious  and  laborious,  and 
this  report,  in  view  of  the  limitation  in  the  time  allotted  therefor,  is  submitted 
with  the  consciousness  that  it  is  not  as  thorough  and  complete  as  the  writer  would 
have  desired  and  not  devoid  of  imperfections.  I  trust,  however,  that  it  may  serve 
the  purpose  of  your  Commission. 

REVIEW  OF  CONDITIONS. 

In  the  States  hereinafter  reported  upon  are  represented  substantially  all  the 
special  methods  thus  far  devised  for  the  taxation  of  corporations  of  a  quasi- 
public  character,  except  that  of  a  fixed  rate  upon  net  earnings,  which  is  in  vogue 
in  the  States  of  Delaware  and  Virginia,  and  advocated  by  some  distinguished 

7 


8  INDUSTRIAL    COMMISSION. 

writers  upon  the  subject  of  taxation.  It  is  a  simple  method,  requiring  no  special 
elucidation.  While,  as  an  abstract  principle,  it  may  perhaps  be  regarded  as  theo- 
retically correct,  still,  under  existing  economic  conditions  and  varied  business 
development  of  such  corporations,  and  in  view  of  the  experience  of  some  States 
with  it,  it  can  hardly  be  regarded  as  preferable  in  actual  practice  to  that  of  a 
State»"tax  upon  gross  earnings. 

The  inadequacy,  under  existing  economic  conditions,  of  the  general  property 
tax,  so  called,  and  its  utter  failure,  even  under  the  most  rigorous  and  effective 
administrative  methods  that  have  been  devised,  to  reach  for  taxation  property  of 
a  corporate  and  intangible  character,  are  recognized  in  all  the  States  named. 

It  is  clear  that  under  this  system  there  are  numerous  forms  of  wealth  that  do 
not  and  can  not  be  made  to  bear  a  just  share  of  the  public  burdens,  and  which  in 
large  part  evade  or  escape  taxation,  and  some  forms  which,  when  reached  at  all 
under  the  prevailing  general  property  tax,  are  riot  equally  and  uniformly  but 
unjustly  and  disproportionately  taxed,  as  compared  with  other  property.  The 
inevitable  result  is  that  real  estate  and  some  forms  of  personalty  are  unduly  bur- 
dened with  taxation. 

These  conditions  under  the  search  light  of  aggressive  investigation  have  engen- 
dered positive  public  and  political  agitation  in  many  of  the  States,  and  have 
inclined  people  in  every  State,  keenly  alive  to  prevailing  injustice,  to  vigorous 
criticism  and  denunciation  of  "tax-dodging"  individuals  and  corporations. 

While  State  tax  officials,  tax  commissioners,  and  writers  upon  taxation,  with 
considerable  justification,  inveigh  against  the  efforts  of  individuals  and  corpora- 
tions to  evade  and  escape  just  taxation,  it  should  in  justice  be  said  that  there  is  a 
lack  of  appreciation  of  the  fact  that  the  principal  cause  of  these  conditions  is 
inherent  in  the  system  itself,  rather  than  in  a  general  desire  to  avoid  just  taxa- 
tion. In  all  the  States  named  vast  amounts  of  property  are  virtually  exempt 
from  taxation,  and  other  property  is  unjustly  and  grievously  burdened  through 
the  operation  of  bad  systems  and  injudicious  laws.  It  is  useless  to  inveigh  against 
tax  dodgers  and  faulty  administration  unless  the  methods  of  taxing  such  classes 
of  property  are  changed. 

Representatives  of  corporate  management  and  others  are  animated  usually  not 
so  much,  by  the  fear  of  "  equal  taxation  "  as  of  unequal  taxation  under  the  pre- 
vailing systems. 

Justice  Cooley,  in  his  work  on  Taxation,  says: 

The  assessment  of  personal  property  reaches  so  small  a  portion  of  the  amount 
really  protected  by  Government  that  it  might  almost  be  said  that  laws  for  the 
purpose  remain  on  the  statute  books  rather  as  incentives  to  evasion  and  fraud 
in  the  dealings  of  the  citizen  with  the  State  than  as  a  means  of  raising  a  revenue 
for  public  purposes. 

This  might  aptly  be  applied  to  the  system  for  the  taxation  of  corporations  as 
well  as  intangible  personalty  in  many  of  the  States,  a  system  that  puts  a  premium 
upon  evasion  and  inflicts  a  penalty  upon  honesty  and  weakness. 

The  remedies  seem  to  lie  in  the  adoption  by  the  several  States,  working  in  har- 
mony so  far  as  may  be,  of  new  and  modern  methods  based  on  correct  principles 
for  the  taxation  of  special  forms  of  property,  separate  and  distinct  from  the 
general  property  tax  in  respect  to  both  valuation  and  rates  of  taxation,  and  a 
thorough  administration  thereof. 

In  the  States  investigated  there  has  been  more  or  less  departure  from  the  gen- 
eral property  tax  toward  the  adoption  of  special  methods  for  the  taxation  of 
corporations.  With  few  exceptions,  however,  efforts  in  that  direction  have  thus 
far  been  devoid  of  real  method  or  design,  and  upon  the  whole  "  chaos  "  is  the  only 
descriptive  term  applicable  to  existing  conditions  in  Commonwealth  taxation. 

There  is  a  marked  tendency  in  all  these  States  toward  making  earning  power 
the  basis  of  taxation  for  quasi-public  corporations.  Properly  directed,  this  must 


TAXATION    OF    COBPOKATIONS.  9 

be  regarded  as  the  correct  principle  and  capable  of  practical  application  to  such 
corporations  under  existing  industrial  conditions.  There  is  also,  however,  a  strong 
inclination  to  cling  to  the  old  system  in  part,  and  to  use  this  principle  in  conjunc- 
tion with  some  feature  or  factor  of  the  property  tax,  more  particularly  to  use 
earning  power  as  a  basis  of  property  valuations  in  connection  with  property  tax 
or  '•  uniform  "  rates. 

A  mistaken  conception  of  the  property-tax  theory  of  "  uniformity,"  and  a  gen- 
eral disposition  to  apply  the  misleading  iron  rule  of  equal  taxation  to  all  forms 
of  property,  are  revealed  in  most  of  these  States,  so  far  as  public  sentiment  is  con- 
cerned. As  bearing  upon  this  observation,  the  following  is  quoted  from  the  case 
of  Pacific  Express  Company  v.  Seibert  (142  U.  S.  Supreme  Court  Reports,  351): 

This  court  has  repeatedly  laid  down  the  doctrine  that  diversity  of  taxation, 
both  with  respect  to  the  amount  imposed  and  the  various  species  of  property 
selected  either  for  bearing  its  burdens  or  for  being  exempt  from  them,  is  not 
inconsistent  with  a  perfect  uniformity  and  equality  of  taxation  in  the  proper 
sense  of  those  terms;  and  that  a  system  which  imposes  the  same  tax  upon  every 
species  of  property,  irrespective  of  its  nature,  condition,  or  class,  will  be  destruc- 
tive of  the  principle  of  uniformity  and  equality  in  taxation  and  of  a  just  adapta- 
tion of  property  to  its  burdens. 

The  great  problem  of  Commonwealth  taxation,  of  commanding  interest  in  all 
States,  consists  practically  of  reform  in  the  methods  of  taxing  corporations  and 
individual  personalty  of  an  intangible  character,  and  an  improved  administration 
of  a  circumscribed  property  tax. 

The  principles  that  taxes  should  be  levied  in  proportion  to  ability  to  pay,  and 
that,  even  under  the  general  property  system,  they  are  designed  to  be  upon  per- 
sons rather  than  upon  property,  are  generally  recognized.  Under  existing  eco- 
nomic conditions  property  is  no  longer  regarded  as  an  adequate  test  of  ability  to 
contribute  to  the  support  of  the  government.  Hence  the  marked  tendency  to 
apply  different  tests  to  special  classes  of  property  owners.  There  is  a  growing 
class  of  citizens  who  receive  large  incomes  or  salaries,  and  enjoy  all  the  advan- 
tages of  society  and  good  government,  who,  though  possessed  of  abundant  ability 
to  pay  taxes,  are,  under  existing  systems,  practically  exempt  from  taxation  or 
inadequately  taxed.  This  class  is  receiving  and  must  continue  to  receive  especial 
attention  in  the  revision  or  reformation  of  taxing  systems  in  the  several  States. 

While  a  tax  upon  individual  incomes  is  generally  conceded  to  be  just  and  equi- 
table in  principle,  it  has  been  received  with  disfavor  and  regarded  as  impractical 
in  its  operation.  It  is  apparent,  however,  to  the  careful  student  of  Commonwealth 
taxation,  that  because  of  its  justice  and  the  increasing  efficiency  of  State  admin- 
istrative methods  that  are  being  evolved,  the  idea  of  a  limited  supplementary 
State  income  tax  is  growing  in  favor  and  coming  to  be  more  generally  regarded 
as  a  practical  measure  under  State  supervision. 

Such  a  tax  has  always  prevailed  in  Massachusetts,  the  present  law  of  that  Com- 
monwealth, which  the  legislature  recently  refused  to  abandon,  imposing  a  tax 
upon  so  much  of  the  income  of  a  profession,  trade,  or  employment  as  exceeds 
the  sum  of  §2,000,  but  exempting  income  derived  from  property  subject  to  taxa- 
tion. While  this  law  is  imperfectly  administered,  it  is  not  infrequently  suggested 
by  eminent  authorities  upon  the  subject  that  a  supplementary  income  tax  of  that 
character  imposed  directly  by  the  States,  under  modern  methods  of  administra- 
tion, would  become  an  efficient  and  practical  source  of  State  revenue.  In  con- 
junction with  the  principle  of  taxing  corporations  upon  earning  capacity  it  seems 
destined  to  receive  increasing  consideration  in  the  several  States. 

GEORGE  CLAPPERTON. 


MASSACHUSETTS. 

The  principal  source  of  revenue  in  this  State,  as  in  most  others,  is  the  general 
tax  on  property. 

POLL  TAX. 

A  peculiar  feature  still  retained  in  the  taxation  system  of  this  State  is  the  poll 
or  capitation  tax  levied  on  every  male  inhabitant  above  the  age  of  21  years,  citizen 
or  alien,  and  upon  every  female  citizen  of  said  age  who  requests  to  be  so  assessed. 
In  the  early  period  of  our  history  the  poll  tax  was  quite  general  and  popular,  but 
gradually  became  obnoxious  and,  in  some  of  the  States,  as  Ohio,  was  prohibited 
by  constitutional  provision. 

Careful  provisions  are  made  in  the  Massachusetts  law  for  obtaining  accurate 
lists  of  those  subject  to  this  tax,  and  the  assessors  assess  upon  them  State  and 
county  taxes.  The  State  tax  is  assessed  upon  the  number  of  polls  in  each  place 
until  such  assessment  amounts  to  $1  upon  each  poll,  the  remainder  of.  said  tax 
being  then  assessed  upon  property.  County  taxes  are  assessed  in  like  manner. 
The  result  is  that  the  rate  of  poll  tax  is  $2  per  year  throughout  substantially  the 
whole  State. 

Formerly  the  payment  of  this  tax  was  made  by  law  a  condition  of  the  exercise 
of  the  franchise  and  was  in  most  part  paid  either  by  the  person  assessed  or  by 
political  organizations.  This  provision  was  repealed  by  an  amendment  of  the 
constitution  in  1891.  Since  that  time  the  collection  of  the  poll  tax  from  those  not 
liable  to  property  tax  has  been  difficult,  and  in  cities  it  is  now  very  largely  uncol- 
lectable  from  the  persons  who  are  not  taxed  upon  property.  Notwithstanding 
this,  the  cities  and  towns  of  the  State  are  required  to  contribute  their  apportioned 
taxes,  State  and  county,  whether  by  poll  tax  or  property  tax,  so  that  the  resources 
of  State  and  counties  are  not  affected  by  failure  to  collect  poll  taxes. 

The  number  of  persons  assessed  for  poll  tax  in  1896  was  723,736;  the  number  of 
persons  assessed  for  that  tax  only  was  511,659,  and  the  total  amount  of  taxes 
assessed  on  polls  was  $1,434,629.  The  total  amount  assessed  on  polls  in  1898  was 
$1,478,630,  and  in  1899,  $1,504,990. 

GENERAL  PROPERTY  TAX. 

All  property,  real  and  personal,  of  the  inhabitants  of  this  State  not  expressly 
exempted  by  law  is  subjected  to  taxation.  There  is  the  common  exemption  of 
property  used  for  the  public  good,  and  special  exemptions  designed  to  lighten  the 
burden  of  taxation  upon  those  not  able  to  bear  it  easily.  Conspicuous  in  the  latter 
class  are  the  property  of  soldiers  or  sailors  who  served  in  the  war  of  the  rebellion, 
or  their  wives  (exempt  up  to  $2,000  if  they  suffered  certain  disablements  or 
became  permanently  incapacitated  for  manual  labor,  providing  their  estate  does 
not  exceed  $5,000) ;  the  tools  of  a  mechanic  not  exceeding  $300  in  value,  and  house- 
hold furniture  not  exceeding  $1,000  in  value. 

The  tax  on  real  estate  is  by  far  the  most  important,  nearly  three-fourths  of  the 
taxes  of  the  State  being  assessed  on  real  property.  The  taxation  of  real  estate  is 
based  in  the  usual  manner  upon  assessment  by  estimate  and  valuation  by  local 
assessors. 

There  seems  to  be  an  unusual  lack  of  uniformity  in  the  assessed  valuation  of 
real  estate  in  this  State.  The  tax  commission  in  its  report  of  1897  shows  that 
taxes  in  many  of  the  farming  towns,  as  a  result  of  industrial  causes,  are  excessively 
and  unfairly  heavy  as  compared  with  taxes  on  real  property  in  other  parts  of  the 
State,  real  estate  in  some  towns  being  assessed  above  its  selling  value  and  the  rate 
often  being  $16  to  $20  and  sometimes  more  per  $1,000. 

The  total  assessed  valuation  of  real  estate  for  taxation  in  1896  was  $2,040,200,644. 
The  total  amount  of  taxes  assessed  upon  real  estate  was  $30,120,730,  out  of  a  total 
tax  assessment  on  polls  and  property  of  $39,954,339. 

In  1898  the  assessed  valuation  of  real  estate  was  $2,182,596,651.  The  total 
amount  of  taxes  assessed  upon  real  estate  was  $33,394,643,  out  of  a  total  tax  assessed 

11 


12  INDUSTRIAL    COMMISSION. 

on  polls  and  property  of  $43,792,378.  In  1899  the  total  assessed  valuation  of  real 
•estate  was  $2,247,094,547,  and  of  personal  property, including  resident  bank  stock, 
$628,926,675.  The  tax  on  real  estate  was  $34,188,810,  out  of  a  total  tax  on  polls  and 
property  of  $43,038,672. 

MORTGAGES. 

A  distinguishing  feature  of  the  method  of  taxing  real  estate  is  the  treatment  of 
mortgaged  property.  The  provisions  of  the  statute  are  designed  to  impose  only 
one  tax  on  real  estate,  whether  mortgaged  or  not.  the  mode  of  payment  of  this  one 
tax  being  left  to  adjustment  between  mortgagor  and  mortgagee.  This  applies 
only  to  mortgages  on  taxable  real  estate;  mortgages  on  realty  situated  outside  the 
State  or  on  real  estate  within  it  but  exempt  from  taxation,  such  as  church  property, 
are  taxable  as  personal  property  to  their  holders.  The  mortgagor  or  mortgagee 
of  taxable  realty  may  make  to  the  local  assessor  a  statement  of  the  amount  of  the 
mortgage  and.  name  and  residence  of  the  holder  of  the  mortgage  interest  therein. 
The  law  provides  that  when  this  is  done,  the  mortgage  is  to  be  taxed  to  the  holder, 
usually  at  its  face  value,  but  not  to  an  amount  in  excess  of  the  fair  cash  value  of 
the  mortgaged  property.  The  making  of  the  statement,  however;  is  optional  with 
the  mortgagor,  and  there  is  usually  no  inducement  to  make  it.  mortgages  being 
invariably  drawn  obligating  the  mortgagor  to  pay  all  taxes.  The  mortgagee  is 
therefore  virtually  exempted  from  taxation  on  the  mortgage. 

This  method  was  adopted  in  1881.  Prior  to  that  time  both  the  mortgage  and  the 
mortgaged  property  were  taxed  for  their  full  amounts  to  their  respective  owners. 
It  is  pointed  out  by  the  tax  commission  of  1897  that  under  this  former  method 
the  taxation  of  mortgages  was  carried  out  with  great  uncertainty,  and  the  larger 
proportion  of  mortgage  securities  held  by  private  lenders  were  not  in  fact  taxed; 
the  rate  of  interest,  however,  was  affected  by  the  risk  of  taxation. 

The  result  of  the  practical  exemption  of  mortgages  from  taxation  by  the  law 
of  1881,  providing  for  the  taxation  of  mortgaged  real  estate  once  for  all,  and  per- 
mitting mortgagor  and  mortgagee  to  arrange  between  themselves  for  the  payment 
of  the  taxes,  was  a  reduction  of  the  rate  of  interest,  not  by  the  average  rate  of 
taxation,  but  about  three-quarters  of  1  per  cent.  The  competition  in  mortgage 
investments  was  greatly  increased,  and  there  was  a  general  and  substantial  decline 
in  the  rate  of  interest. 

The  commission,  after  thorough  investigation,  recommends  the  retention  of 
the  present  method  of  one  tax  upon  mortgaged  property,  with  right  of  adjust- 
ment of  payment  between  mortgagor  and  mortgagee.  The  commission  discusses 
•"  the  other  feasible  method,"  that  followed  by  the  State  of  California.  There 
also  but  one  tax  is  imposed  upon  mortgaged  property;  the  mortgagor  is  called 
upon  to  state  the  name  of  the  mortgagee  and  the  amount  of  the  mortgage,  each 
being  taxed  in  proportion  to  his  interest  in  the  property,  and  no  agreement  for 
payment  of  all  taxes  by  the  mortgagor  is  recognized.  The  effect  of  this  method, 
as  shown  by  the  investigation  of  the  commission,  is  that  while  the  lender  is 
taxed  upon  the  full  amount  of  his  mortgage,  the  debtor  is  compelled  to  pay  a 
rate  of  interest  higher  by  the  amount  of  the  tax  and  even  by  something  more — 
mortgages  in  California  usually  bearing  2  per  cent  additional  interest  as  com- 
pared with  other  loans  or  investments. 

In  view  of  the  experience  in  California  and  general  probabilities,  the  commis- 
sion concludes  that  the  taxation  of  mortgages  by  an  unfailing  process  would 
increase  the  interest  charged  at  least  to  the  extent  of  the  tax,  and  says  that  if  the 
existing  method  is  defective,  in  that  persons  of  means  lending  on  mortgages  do 
not  contribute  proportionately  to  the  public  burden,  the  remedy  should  be  sought 
in  some  other  way.  As  a  means  of  securing  greater  contributions  from  the 
estates  of  persons  of  means,  the  commission  recommends  an  inheritance  tax  and 
an  income  tax  estimated  according  to  the  rental  value  of  the  habitation  occupied. 
The  joint  legislative  committee  on  taxation,  in  its  report,  upon  consideration 
of  the  report  of  the  special  tax  commission  on,  the  subject  of  the  taxation  of 
mortgages,  says  that  the  present  law  seems  to  work  well,  and  that  to  repeal 
it  would  be  an  unpardonable  step  backwards. 

PERSONAL  PROPERTY. 

The  statutes  provide  that,  siibject  to  certain  exceptions  hereinafter  considered, 
"  all  personal  estate  within  or  without  the  Commonwealth  shall  be  assessed  to  the 
owner  in  the  city  or  town  where  he  is  an  inhabitant  on  the  1st  day  of  May." 
The  exceptions  to  the  rule  that  personal  property  is  taxable  to  the  owner  at  his 


TAXATION    IN    MASSACHUSETTS.  13 

place  of  domicile  relate  to  certain  specified  kinds  taxed  where  situated,  or  where 
the  business  for  which  they  are  used  is  conducted.  They  consist  in  general  of  all 
goods,  wares,  merchandise,  and  other  stock  in  trade  or  manufacturing  within 
the  State,  whether  the  owners  reside  within  or  without  the  State.  Such  property 
is  taxed  where  the  business  for  which  it  is  used  is  carried  on,  whether  the  owner 
resides  there  or  not.  The  owner  may  reside  in  some  other  part  of  the  State  or 
outside  the  State.  Stock  in  trade  outside  the  State,  owned  by  inhabitants  thereof, 
is  taxed  to  the  owner  where  he  lives.  These  provisions,  however,  do  not  apply 
to  stock  in  trade  owned  by  corporations  organized  within  the  State. 

"  All  machinery  employed  in  manufactures  whether  owned  by  corporations  or 
individuals  is  assessed  where  it  is  situated  or  employed."  Horses,  mules,  neat 
cattle,  sheep,  and  swine,  when  kept  in  places  other  than  those  where  the  owners 
reside,  and  horses  employed  on  stages  or  other  vehicles  for  transportation  of  pas- 
sengers, are  assessed  to  the  owner  in  the  place  where  they  are  kept.  All  personal 
property  within  the  State  leased  for  profit  is  assessed  for  taxation  where  .such 
property  is  situated,  to  the  owner  or  person  having  possession  thereof. 

As  to  these  exceptions  of  tangible  and  visible  property,  the  statutes  depart  from 
the  general  rule  that  personalty  is  taxable  to  the  owner  at  his  place  of  domicile, 
but  property  of  an  inhabitant  of  the  State  situated  without  the  State  is  treated 
according  to  the  general  rule. 

Personal  property  in  general  is  assessed  for  taxation  by  local  assessors,  who  are 
directed  to  require  all  inhabitants  to  bring  in  true  sworn  lists  of  all  personal 
estate  owned  by  them.  There  is,  however,  no  direct  penalty  imposed  for  failure 
to  comply  with  this  requirement,  the  assessors  in  such  cases  being  required  to  ascer- 
tain, according  to  their  best  information  and  belief,  the  amount  and  kinds  of 
personal  estate;  but  from  the  tax  assessed  the  taxpayer  may  be  allowed  an  abate- 
ment only  in  case  the  tax  exceeds  by  more  than  50  per  cent  what  it  would  have 
been  if  return  under  oath  had  been  made.  In  actual  practice,  according  to 
the  best" information  obtainable,  but  a  small  portion  of  personal  property,  even 
of  an  intangible  character,  is  assessed  on  sworn  returns  of  taxables,  the  greater 
portion  being  by  doomage  of  local  assessors. 

The  law  defines  with  much  detail  what  is  personal  property  for  the  purpose  of 
taxation.  It  may  be  classified  under  the  following  heads: 

1.  Goods,  chattels,  money,  and  effects,  wherever  they  are. 

2.  Ships  and  vessels  not  engaged  in  the  foreign  carrying  trade. 

3.  Money  at  interest  and  other  debts  due  the  persons  to  be  taxed  over  and  above 
what  they  are  indebted  or  pay  interest  for.     Debts  secured  by  mortgages  on  taxable 
real  estate  are  expressly  declared  to  be  not  included  in  such  taxable  debts,  and 
may  not  be  used  by  the  debtor  to  reduce  the  amount  of  taxable  debts  due  him. 

4.  "Public  stocks  and  securities,  bonds  of  all  railroads,  including  street  railways, 
stocks  in  turnpikes,  bridges,  and  moneyed  corporations  within  or  without  the 
State."    But  shares  in  corporations  chartered  by  the  State  or  organized  under  its 
general  laws  are  not  taxable  to  the  holder  for  State,  county,  city,  or  town  pur- 
poses, the  taxation  of  such  property  being  secured  by  the  general  franchise  tax 
levied  on  corporations. 

5.  Income  from  an  annuity,  from  ships  and  vessels  engaged  in  the  foreign  carry- 
ing trade,  and  so  much  of  the  income  of  a  profession,  trade,  or  employment  as 
exceeds  the  sum  of  $2,000  a  year;  but  no  income  is  taxable  if  derived  from  prop- 
erty subject  to  taxation. 

Under  this  provision  incomes  from  professions  and  salaries  are  taxable,  and  it 
has  been  held' that  incomes  from  trade,  being  derived  from  skill  and  manage- 
ment in  business,  as  well  as  from  the  use  of  capital,  are  taxable,  even  though 
the  property  engaged  in  the  business  was  already  taxed. 

The  total  valuation  of  personal  property  assessed  for  taxation  by  local  assessors 
in  1896  was  $582,319,634,  the  amount  of  taxes  $8,398,980.  The  valuation  and  tax 
upon  real  estate  for  the  same  year  were  about  three  and  one-half  times  these 
amounts. 

In  1898  the  assessed  valuation  of  personal  property  was  $581,646,133,  and  the 
amount  of  taxes  $8,719,105.  The  assessed  valuation  of  real  estate  in  that  year  was 
about  three  and  three-fourths  times  that  of  personalty.  In  1899  the  assessed 
valuation  of  personalty  was  $628,926,675,  and  the  amount  of  taxes  $9,344,872. 

The  committee  on  taxation  of  the  Boston  Executive  Business  Association 
reported:  "  The  personal  property  of  both  the  city  and  State,  which  under  the  law 
is  subject  to  taxation,  can  not  be  less  than  twice  the  value  of  the  real  estate. 
Upon  this  all  writers  agree." 

The  real  estate  in  1896  being  $2.040,000,000  in  assessed  value,  the  personalty 
would,  on  this  basis,  be  $4,080,000,000,  instead  of  $582,000,000. 


14  INDUSTRIAL    COMMISSION. 

GENERAL  CORPORATION  TAX. 

The  distinctive  feature  of  the  system  of  taxation  of  corporate  property  in 
Massachusetts  is  that  it  is  administered  wholly  or  in  part  by  officers  of  the  State, 
instead  of  by  local  officers. 

The  general  franchise  tax,  so  called,  on  corporations  chartered  or  organized 
under  the  laws  of  the  State,  designed  to  reach  for  the  purpose  of  taxation  all  the 
property  of  corporations,  once  and  once  only,  is  the  most  important  tax  in  the 
general  system.  "  It  is  unique  in  the  tax  experience  of  the  States  of  the  Union." 

The  real  estate  and  machinery  of  all  corporations  situated  within  the  State  are 
assessed  by  the  local  authorities  in  common  with  other  real  estate  and  personalty 
and  the  taxes  thereon  paid  directly  to  the  respective  towns  and  cities  where  the 
property  is  located,  the  other  personalty  and  the  stock  being  exempt  from  direct 
local  taxation. 

The  remainder  of  the  property  of  corporations  (except  banks  and  some  other 
corporations,  taxation  of  which  is  provided  for  by  special  statutes),  as  deter- 
mined by  the  market  value  of  outstanding  shares  in  excess  of  the  value  of  real 
estate  and  machinery  taxed  locally,  is  assessed  and  taxed  by  the  State  directly 
and  payment  made  in  the  first  instance  to  the  State  treasury;  a  large  portion  of 
the  taxes  so  raised  is  then  distributed  among  the  towns  and  cil^es  of  the  State. 

This  annual  corporation  tax  applies  to  corporations  of  the  most  various  kinds, 
such  as  manufacturing  and  trading  establishments,  railroads,  street  railways,  gas 
and  electric-lighting  companies,  electric-power  companies,  private  water-supply 
companies,  telegraph  and  telephone  companies,  and  certain  insurance  companies. 

This  general  corporation  tax  is  assessed  by  the  tax  commissioner  of  the  State, 
valuation  being  based  upon  returns  from  the  corporations  and  from  local  assessors 
and  such  other  information  as  the  commissioner  may  obtain. 

Every  corporation  subject  to  this  tax  is  required  to  return  annually  to  the  tax 
commissioner,  under  oath  of  its  treasurer,  a  complete  list  of  its  shareholders  and 
their  places  of  residence,  the  number  of  shares  owned  by  each,  the  amount  of 
capital  stock  of  the  corporation,  its  place  of  business,  the  {jar  value  and  the  mar- 
ket value  of  its  shares  on  the  1st  day  of  May,  and  a  detailed  statement  of  the 
works,  structures,  real  estate,  and  machinery  subject  to  local  taxation  within  the 
State;  in  the  case  of  railroad  and  telegraph  companies,  the  whole  length  of  their 
lines  and  the  length  of  so  much  of  their  lines  as  is  within  the  State;  in  the  case 
of  other  corporations,  the  amount,  value,  and  location  of  all  works,  structures, 
real  estate,  and  machinery  owned  by  them  subject  to  taxation  without  the  State. 

Returns  to  the  tax  commissioner  are  also  made  by  the  local  assessors,  showing 
the  names  of  all  corporations  and  containing  statements  of  their  property  and 
the  amounts  for  which  such  property  is  valued  for  local  taxation. 

From  these  returns  or  from  other  sources,  at  his  discretion,  he  not  being  bound 
by  the  returns  of  the  corporation  as  to  the  value  of  corporate  franchises  or  by  the 
returns  of  local  assessors  as  to  the  value  of  the  property  assessed  locally,  the  com- 
missioner ascertains  the  true  value  of  the  shares  of  each  corporation,  which  is 
designated  as  the  "  true  value  of  its  corporate  franchise." 

The  commissioner,  in  certain  cases,  is  authorized  to  examine  the  books  of  cor- 
porations and  to  examine,  under  oath,  the  treasurer  and  directors. 

The  tax  commissioner  then,  from  the  aggregate  value  of  the  shares  of  the  cor- 
poration thus  determined,  makes  the  following  deductions: 

First.  In  the  case  of  railroads  and  telegraph  companies  whose  lines  extend' 
beyond  the  State,  he  deducts  such  a  proportion  of  the  whole  valuation  as  that 
part  of  the  line  without  the  State  bears  to  the  entire  line,  and  also  deducts  an 
amount  equal  to  the  value  of  real  estate  and  machinery  located  and  subject  to 
taxation  within  the  State  as  determined  by  him. 

Second.  In  the  case  of  a  telephone  company,  so  much  of  the  whole  valuation  as 
is  proportional  to  the  number  of  telephones  used  or  controlled  by  it  without  the 
State  is  deducted,  and  also  the  value  of  all  stock  in  other  corporations  held  by  it 
upon  which  it  has  paid  a  tax  for  the  preceding  year. 

Third.  In  the  case  of  an  insurance  company,  the  value  of  mortgages  on  real 
estate  held  by  it  subject  to  local  taxation. 

Fourth.  In  the  case  of  all  other  corporations,  there  is  deducted  an  amount  equal 
to  the  value  of  the  real  estate  and  machinery  subject  to  local  taxation  within  or 
without  the  State. 

The  true  value  of  corporate  franchises,  thus  diminished,  is  then  taxed  at  a  rate 
which  is  regarded  as  the  average  rate  of  taxation  in  the  State,  determined  by  an 
apportionment  of  the  whole  amount  of  money  to  be  raised  by  taxation  upon  prop- 
erty in  the  State  during  the  current  year,  as  returned  by  local  officials,  upon  the 
aggregate  valuation  of  the  preceding  year. 


MASSACHUSETTS    COEPOEATION    TAXES.  15 

The  amount  of  the  tax  thus  computed  on  corporate  excess  is  paid  by  each  cor- 
poration to  the  State  treasurer,  upon  notice  from  the  tax  commissioner  of  the 
amount  due,  thus  reducing  the  expense  of  collection  to  a  minimum. 

The  weakness  of  this  system  of  taxation  upon  corporate  excess  is  the  method  of 
determining  the  rate  of  taxation,  which,  theoretically  fair  and  equal  as  com- 
pared with  other  property,  is  likely  to  be  practically  unequal  and  excessive 
because  of  the  more  accurate  method  of  ascertaining  the  "  true  value "  of  the 
property  assessed.  The  "  average  rate  "  obtained  by  this  method  is  apt  to  be  une- 
qual and  misleading,  and  laws  similar  in  general  provisions  have  in  some  States 
been  held  unconstitutional  and  void  as  violating  the  requirement  of  uniformity 
provided  in  State  constitutions.  A  better  method,  in  some  respects,  would  be  a 
rate  fixed  by  law. 

However,  it  is  claimed  that  under  penalties  applied  with  ease  and  certainty  these 
taxes  are,  as  a  rule,  paid  promptly  and  with  little  complaint,  the  corporations 
readily  adjusting  themselves  to  them.  This  tax  having  been  paid  into  the  State 
treasury  is  in  part  distributed  among  cities  and  towns  of  the  State  and  in  part 
retained  by  the  State.  Such  proportion  of  the  tax  as  corresponds  to  the  num- 
ber of  shares  of  stock  owned  by  residents  of  the  State,  as  shown  by  the  corpora- 
tion's list  of  stockholders,  or  such  other  evidence  as  the  tax  commissioner  may 
obtain,  is  paid  to  the  several  cities  and  towns  where  such  shareholders  reside. 
The  remainder  of  this  tax,  representing  shares  of  stock  held  outside  the  State,  is 
retained  in  the  State  treasury.  This  apportionment  of  tax  according  to  the  resi- 
dence of  shareholders  is  thought  to  work  inequitably. 

Formerly  these  provisions  applied  to  street-railway  companies,  whether  char- 
tered in  or  without  the  State,  doing  business  within  the  State,  but  by  the  act  of 
1898  the  distribution  of  the  franchise  taxes  of  street-railway  corporations  is 
changed  from  the  towns  where  the  stockholders  reside  to  the  towns  where  the 
tracks  are- located,  in  proportion  to  the  length  of  tracks  therein. 

Foreign  telegraph  companies  using  lines  within  the  State  are  required  to  make 
like  returns  and  pay  a  like  tax. 

Mining  companies  chartered  or  organized  within  the  State  for  the  purpose  of 
mining  without  the  State  are  required  to  make  sworn  reports  of  the  amount  of 
their  capital  stock,  and  pay  thereon  to  the  State  treasurer  a  tax  of  one-twentieth 
of  1  per  cent  upon  their  capital  stock.  Such  companies  are  also  required  to  make 
accurate  returns,  under  oath,  of  their  business  and  profits,  and  the  tax  commis- 
sioner, from  such  report  or  otherwise,  determines  the  net  profits  or  gains  of  each 
such  corporation,  and  assesses  a  tax  of  4  per  cent  upon  the  amount  thereof. 

Yield  of  the  general  corporation  tax  in  1896. 

Net  amount  assessed  by  tax  commissioner $3, 829, 528. 02 

Amount  certified  as  due  to  cities  and  towns 2, 729, 665. 85 


Balance  accruing  to  the  State 1,099,862.17 

From  the  excellent  report  of  the  Massachusetts  tax  commissioners,  made  in  1897, 
from  which  source  we  derive  much  of  the  information  herein  contained,  we  quote 
the  following  comments  upon  the  Massachusetts  system  of  taxing  corporations, 
the  italicizing  being  our  own: 

"  We  have  seen  that  the  methods  of  taxing  corporations  chartered  by  the  State 
and  banks  are  in  their  main  lines  similar.  We  shall  accordingly  consider  them 
together. 

"  The  taxation  of  shares  in  domestic  corporations  and  in  banks  is  in  striking 
contrast  with  that  of  bonds,  foreign  stocks,  and  other  securities  taxable  to  the 
holder.  Here  there  is  no  demand  for  a  statement  from  the  individual  taxpayer, 
no  doomage  by  local  assessors,  no  guesswork,  no  possibility  of  evading  or  dimin- 
ishing taxes  by  change  of  domicile,  no  question  of  double  taxation.  The  real  estate 
and  machinery  are  assessed  locally,  doubtless  not  with  perfect  equality  and  justice, 
but  probably  as  carefully  as  would  be  possible  under  any  system.  The  corporate 
excess  is  taxed  at  a  uniform  rate  by  the  State.  The  taxes  are  regular  and  certain. 
They  are  heavy,  and  they  yield  a  large  revenue.  The  rate  of  taxes  on  corporate 
excess  for  the  last  15  years  has  been  from  year  to  year  not  far  from  $15  per  $1,000, 
or  about  1^-  per  cent  on  the  capital.  The  assessment  in  1896  was  $3,829,528.02. 
Yet,  little  complaint  is  heard  regarding  these  taxes — a  signal  proof  that  the  tax- 
payers accommodate  themselves,  if  not  with  ease,  at  least  without  serious  com- 
plaint, to  burdens  which  are  steady,  regular,  predictable,  and  for  which,  in 
consequence,  they  are  able  to  make  calculations  and  adjust  their  affairs. 


16  INDUSTRIAL    COMMISSION. 

"  The  corporation  tax  is  particularly  simple,  and  is  assessed  with  unerring  exact- 
ness in  the  case  of  large  and  well-known  corporations  whose  shares  are  regularly 
dealt  in,  and  consequently  have  a  publicly  recorded  value.  Railways,  banks,  the 
larger  manufacturing  corporations,  and  others  whose  stocks  are  frequently  quoted, 
are  taxed  without  a  word  of  inquiry,  and  without  a  possibility  of  escape.  A  very 
large  number  of  miscellaneous  corporations  are  in  a  somewhat  different  position. 
Their  shares  are  held  by  a  few  individuals,  are  rarely  transferred,  and  are  with- 
out a  quotable  market  value.  In  these  cases  the  statement  required  by  law  from 
the  corporation  itself  as  to  the  market  value  of  its  shares  is  important.  The  tax 
commissioner  may  further  require  a  transcript  of  the  balance  sheet,  and  other 
information  which  he  deems  desirable.  No  doubt  there  is  a  possibility  of  under- 
statement by  a  corporation  of  the  value  of  its  stock,  and  a  possibility  of  the 
manipulation  of  the  balance  sheet.  There  is  reason  to  believe  that  sometimes 
taxes  on  corporate  excess  are  partially  evaded  in  this  way:  but  the  evasions  are 
insignificant  in  comparison  with  those  as  to  taxable  securities.  In  any  case,  they 
affect  but  a  small  proportion  of  the  total  taxes  collected  from  Massachusetts  cor- 
porations as  a  whole.  This  part  of  our  tax  system  is  an  excellent  example  of  the 
method  of  taxing  corporations  at  the  source  and  of  refraining  from  any  dealings 
with  the  individual  holder  of  corporate  securities,  a  method  admitted  on  all 
hands  to  be  the  simplest,  most  efficient,  and  most  equitable  m  the  taxation  of 
corporate  property. 

"  There  are.  however,  some  questions  as  to  the  present  mode  of  distributing  the 
proceeds  on  the  taxes  on  corporate  excess  to  which  we  think  it  necessary  to  call 
the  attention  of  the  general  court.  They  are  distributed,  it  will  be  remembered, 
among  the  several  cities  and  towns  according  to  the  ownership  of  shares  by  their 
inhabitants.  We  have  already  referred  to  some  anomalous  results  of  this 
method  of  distribution.  It  causes  disproportionately  large  sums  to  be  turned 
over  to  a  few  towns  much  resorted  to  by  persons  of  means.  But  even  apart  from 
this  difficulty  there  are  others  which  make  it  doubtful  whether,  under  any  cir- 
cumstances, corporate  excess  should  be  made  a  direct  source  of  revenue  to  the 
towns  and  cities. 

'•  With  many  corporations  there  is  a  very  large  corporate  excess.  All  railways, 
by  an  old  decision  of  the  courts,  are  exempt  from  local  taxation  on  their  right  of 
way;  and,  in  any  case,  the  value  of  their  real  estate  and  machinery,  taxable  locally, 
is  not  a  great  proportion  of  their  total  valuation.  This  is  even  more  strikingly 
true  in  the  case  of  street  railways.  The  cities  and  towns  where  the  shareholders 
happen  to  reside,  perhaps  distant  from  the  place  where  the  enterprise  is  carried 
on,  get  the  main  benefit  of  the  taxes. 

''Disproportion  of  a  different  sort  appears  as  to  some  manufacturing  corpora- 
tions. A  mill  owned  by  a  corporation  may  bring  to  a  town  considerable  popula- 
tion of  working  people  and  a  need  for  schools,  streets,  sewers,  and  water.  It  is 
true  that  it  may  also  bring  some  increase  of  the  taxable  dwellings,  but  this  may 
be  comparatively  small.  If  in  the  taxation  of  mill  property  there  is  considerable 
corporate  excess  over  and  above  the  property  locally  taxed,  the  town  feels  that  it 
is  deprived  of  resources  which  should  fairly  be  called  on  to  aid  in  meeting  the 
additional  expenses. 

f  "  Still  another  anomaly  appears  with  regard  to  trading  and  mercantile  corpora- 
tions. A  firm  or  individual  carrying  on  mercantile  or  manufacturing  business  is 
taxable  locally  on  its  real  estate  and  machinery  only.  Its  stock  in  trade  simply 
forms  a  part  of  its  general  assets,  and  is  one  element  among  the  many  which  go  to 
make  up  the  value  of  its  shares.  As  mercantile  corporations  are  likely  to  own 
little  or  no  real  estate  and  machinery,  the  corporate  excess  is  likely  to  be  large, 
and  the  taxes  are  distributed  mainly  to  the  cities  and  towns  where  the  sharehold- 
ers reside.  In  most  parts  of  the  State  the  shareholders  reside  in  the  cities  and 
towns  where  the  business  is  carried  on,  and  the  distribution  raises  no  question; 
but  in  the  city  of  Boston  many  mercantile  corporations  are  owned  by  sharehold- 
ers who  reside  in  the  suburban  cities  and  towns.  The  latter  get  the  large  corpo- 
rate excess,  while  the  stock  in  trade  is  not  taxable  in  Boston.  It  may  be  that  the 
city  of  Boston  does  not  suffer  seriously  from  this  situation,  for  the  mercantile 
corporations  usually  occupy  expensive  real  estate  and,  as  tenants  or  owners,  con- 
tribute indirectly  or  directly  to  the  taxes  of  Boston;  but  the  suburban  cities  or 
towns  which  get  the  corporate  excess  certainly  seem  to  be  little  entitled  to  the 
sums  turned  over  to  them  in  this  way. 

"  On  the  whole,  the  present  method  of  distributing  corporate  excess  seems  to  us 
to  be  based  upon  a  doubtful  principle  and  to  work  badly  in  practice.  It  is  based 
on  the  legal  fiction  that  the  situs  of  personal  property  is  the  domicile  of  its  owner. 
But  this  theory  has  already  been  disregarded,  so  far  as  the  tax  laws  are  concerned, 
in  various  ways.  It  is  not  followed  in  the  provisions  as  to  stock  in  trade,  live 


MASSACHUSETTS    COEPOEATION    TAXES.  17 

stock,  and  machinery,  or  in  the  taxation  of  savings  banks  and  of  insurance  com- 
panies. It  results  in  an  arbitrary  apportionment  of  large  sums  of  money  with 
little  visible  regard  to  the  real  claims  and  needs  of  the  several  cities  and  towns. 
We  shall  accordingly  make  recommendations  for  a  change  in  this  part  of  the  tax 
system — for  the  retention  of  the  tax  on  corporate  excess  by  the  State  in  the  first 
instance  and  for  the  utilization  of  the  general  financial  resources  of  the  State 
with  a  regard  to  the  just  needs  of  the  local  bodies." 
These  recommendations  have  not  been  adopted  by  the  legislature. 

RAILROADS. 

This  class  of  property  is  assessed  by  the  State  tax  commissioner  as  a  unit  upon 
"the  true  value  of  its  corporate  franchise,"  based  upon  verified  reports  and  such 
other  information  as  the  commissioner  may  obtain,  at  the  "  average  rate  "  through- 
out the  State. 

This  is  in  lieu  of  all  other  taxes  iipon  the  property  within  the  right  of  way,  5 
rods  in  width,  but  all  property  outside  this  right  of  way  is  taxed  locally,  as  other 
property.  The  value  of  real  estate  and  machinery  outside  of  this  right  of  way, 
assessed  by  local  assessors  throughout  the  State  in  1899,  was  $69,027,535,  and  the 
average  rate  was  about  $15.78  per  $1,000,  yielding  about  $1,089,254  in  local  taxes. 

The  tax  on  corporate  franchises  of  railroads  in  1899  was  $1,631 ,354.46,  making  a 
total  tax  of  $2,720,608. 

SUMMARY  OF  RESULTS. 

The  following  is  a  summary  of  the  results  of  the  corporation-tax  law  for  the 
year  1898: 

General  list $4,184,240.72 

Coal  mining,  quarrying,  and  oil  companies 7, 785. 66 

Foreign  railroad  taxes 26, 749. 00 

4,218,775.38 
The  amount  accruing  to  the  Commonwealth  is  shown  below: 

From  general  list  corporations: 

Net  amount  assessed $4, 184, 240. 72 

Amount  due  cities  and  towns 2, 563, 442. 01 

1,620,798.71 

Amount  due  to  cities  and  towns  on  account  of  tax  on  street- 
railway  companies  ...'. 569, 069. 29 


Balance  accruing  to  Commonwealth 1 , 051 , 729 . 42 


Total  valuation  of  capital  stock  of  corporations  in  1898 625, 595, 020. 00 

The  valuation  of  real  estate  and  machinery 390, 392, 347. 00 

Excess  on  which  a  franchise  tax  is  laid  _ 235, 202, 673. 00 

STREET  RAILWAYS. 

In  1898  a  change  was  made  in  the  methods  of  taxing  street  railways. 

The  return  to  the  tax  commission  must  show,  in  addition  to  the  statements 
formerly  required,  the  total  length  of  track  operated,  the  amount  of  capital  stock 
of  the  company,  and  of  the  dividends  paid  thereon  during  the  previous  year 
and  during  each  year  from  its  organization.  Companies  which  have,  from  the 
commencement  of  their  operation,  paid  dividends  of  6  per  cent  on  their  capital 
stock,  and  during  the  year  preceding  the  statement  paid  dividends  exceeding  in 
the  aggregate  8  per  cent  upon  their  capital  stock,  are  required  to  pay  to  the  treasurer 
for  every  such  year,  in  addition  to  the  general  corporate  franchise  tax,  a  tax 
equal  to  such  excess  of  dividends. 

The  portion  of  the  tax  not  retained  by  the  State  is  to  be  apportioned  among 
the  several  cities  and  towns  in  proportion  to  length  of  track  operated  in  such 
cities  and  towns,  instead  of  being  distributed  according  to  ownership  of  shares. 

Roads  are  also  required  to  file  with  the  boards  of  assessors  in  the  several  cities 
and  towns  through  which  they  run  annual  statements  of  total  length  of  track 
and  gross  receipts,  upon  which  gross  receipts  the  assessors  assess  an  excise  tax 
2 


18  INDUSTRIAL    COMMISSION. 

equal  to  such  proportion  of  the  following  percentage  of  gross  receipts  as  the  length 
of  track  operated  in  any  city  or  town  bears  to  the  total  length  of  track  operated 
in  public  ways,  viz: 

In  case  gross  receipts  are  $4,000  or  less  per  mile.  1  per  cent  of  the  total 
annual  gross  receipts;  in  case  of  gross  receipts  exceeding  $4,000  per  mile  and  less 
than  $7,000,  2  per  cent;  in  case  of  gross  receipts  exceeding  $7,000  and  under 
$14,000  per  mile,  2£  per  cent;  in  case  of  gross  receipts  exceeding  $14,000  and  less 
than  $21,000  per  mile,  2|  per  cent;  in  cases  where  gross  receipts  exceed  $21,000 
and  are  less  than  $28,000  per  mile,  2f  per  cent:  and  in  cases  where  gross  receipts 
exceed  $28,000  per  mile,  3  per  cent.  This  excise  tax  is  in  addition  to  the  other 
taxes  provided  by  law. 

BANKS. 

The  method  of  taxing  banks  is  in  general  similar  to  that  of  the  general  corpora- 
tion tax  described,  differing  somewhat  in  detail  to  secure  conformity  to  the  pro- 
visions of  the  Federal  laws  governing  national  banks. 

The  taxes  assessed  are  paid  by  the  banks  directly,  shareholders  having  no 
direct  connection  with  assessment  or  payment,  and  the  taxes  collected  from 
banks  are  apportioned  among  the  cities  and  towns  according  to  residence  of  own- 
ers of  shares  within  the  State,  the  remainder  being  retained  in  the  State  treasury, 
as  in  the  case  of  general  corporations. 

The  shares  are  taxed  to  their  owners  by  the  local  assessors  at  their  fair  cash 
value,  less  the  value  of  the  real  estate  owned  by  the  bank,  which  is  assessed 
directly  to  the  bank  in  like  manner  as  other  real  property  is  assessed  to  the 
owners. 

The  taxes  so  assessed  upon  shares  are  paid  by  the  bank  on  behalf  of  share- 
holders at  the  local  rate  for  State,  county,  and  town  taxes,  and  the  shareholders 
are  then  relieved  from  further  taxation  upon  their  shares. 

The  city  or  town  in  which  the  bank  is  located  is  entitled  to  so  much  of  the  tax 
as  is  represented  by  local  real  estate  owned  by  the  bank  and  by  shares  which  its 
inhabitants  own;  other  towns  or  cities  are  entitled  to  such  proportion  of  the  tax 
as  the  ownership  of  shares  by  their  inhabitants  represents,  while  such  part  of  the 
tax  as  is  represented  by  shares  owned  outside  of  the  State  accrues  to  the  State 
treasury. 

Yield  of  the  bank  tax  in  1896. 

Whole  amount  of  tax  on  shares $1, 543, 535. 11 

Retained  by  t9wns  where  bank  is  located $547, 238. 37 

Certified  to  other  cities  and  towns  on  account  of  shares 

owned 368,718.54 

Due  to  institutions,  societies,  etc 206, 718. 54 

Accuring  to  the  State  treasury 421, 051. 64 


Total 1,543,535.11 

.  Taxation  on  bank  shares,  1898. 

Whole  amount  of  tax  on  bank  shares. $1, 509, 936. 75 

Of  which  there  was  retained  by  towns  on  account  of 

shares  owned  by  residents  _ _  $547. 799. 92 

Amount  paid  into  State  treasury .  976^  136. 83 

1,509,936.75 

Of  this  amount  $412.890.38  accrued  to  the  Commonwealth. 

SAVINGS  BANKS. 

Savings  banks  and  institutions  for  savings  form  a  class  by  themselves.  They 
are  regarded  as  in  the  nature  of  trust  institutions  for  the  benefit  of  depositors  and 
are  not  taxable  under  the  general  corporation  or  bank  law. 

They  pay  to  the  State  a  special  tax  of  one-half  of  1  per  cent  annually  on  the 
amount  of  their  deposits,  subject  to  certain  deductions. 

They  are  required  to  make  semiannual  returns  to  the  State  treasurer,  showing 
the  amount  of  deposits  on  the  first  days  of  May  and  November,  and  the  average 
amount  of  deposits  for  the  six  months  next  preceding  each  of  those  days.  From 
these  returns  the  tax  commissioner  assesses  the  tax  upon  the  various  banks  in 
proportion  to  the  average  amounts  of  their  deposits  during  each  period  at  the  rate 
fixed  by  law,  one-fourth  per  cent  for  each  six  months,  or  one-half  per  cent  per 
year.  Certain  deductions,  however,  are  made  for  the  amounts  invested  in  real 
estate  used  for  banking  purposes  taxed  locally,  in  loans  secured  by  mortgage  on 
taxable  real  estate,  and  in  shares  of  banks  taxed  by  the  State. 


MASSACHUSETTS    CORPORATION    TAXES. 


19 


The  proceeds  of  the  savings-bank  tax  accrue  entirely  to  the  State  treasury. 

Yield  of  the  savings-bank  tax. 

1896..                                                                                                     .  $1,291,256.47 
1898 1,335,750.55 

The  valuation  for  the  latter  year  was  $276,150,455. 
TRUST  COMPANIES. 

These  companies  form  a  separate  class  for  taxation;  they  are  taxed  on  their  cap- 
ital stock  under  the  general  corporation  tax  law  like  other  corporations,  and  are 
also  subject  to  a  separate  tax  on  trust  funds  and  deposits. 

The  tax  on  trust  funds  and  deposits  is  levied  in  two  distinct  parts,  upon  personal 
property  held  in  trust  and  upon  deposits.  Annual  sworn  returns  to  the  tax  com- 
missioner are  required  of  all  personal  property  held  on  the  first  day  of  May, 
which  is  taxable  on  the  aggregate  amount  owned  by  residents  outside  the  State. 

The  tax  commissioner,  guided  by  the  return,  makes  a  valuation  of  the  property, 
and  assesses  a  tax  upon  the  full  value  of  the  property  at  the  rate  determined  under 
the  general  tax  law,  being  the  average  rate  of  taxation,  so  called,  in  the  State. 

Annual  sworn  returns  are  also  required  of  sums  deposited,  with  residences 
of  depositors  and  aggregate  amounts  held  for  depositors  in  each  place.  Upon 
the  total  value  of  these  deposits  the  tax  commissioner  assesses  a  tax  of  three- 
quarters  of  the  average  rate  of  taxation  of  the  State.  These  taxes  are  paid 
directly  to  the  State  treasurer,  and  distributed  among  the  cities  and  towns  of  the 
State,  so  far  as  the  funds  and  deposits  are  owned  by  residents.  Taxes  assessed 
on  property  held  for  persons  outside  the  State  accrue  to  the  State  treasury. 


Valuation  and  taxation  of  personal  estate. 

1896. 

1898. 

Valuation  of  personal  estate  

$1,  289,  059 

$1,  395,  421 

Tax  on  personal  estate 

19  398 

21  865 

INSURANCE  COMPANIES. 

Insurance  companies  organized  under  the  laws  of  Massachusetts,  having 
capital  stock,  are  taxable  on  the  market  value  of  shares  under  the  general  corpora- 
tion tax  law. 

Separate  taxes  are,  however,  imposed  on  certain  kinds  of  insurance  companies. 
Mutual  life  insurance  companies  organized  under  the  laws  of  the  State,  and 
foreign  life  insurance  companies  of  all  kinds  doing  business  in  the  State,  are 
subject  to  a  tax  of  one-fourth  of  1  per  cent  on  the  net  value  of  all  policies  in 
force  held  by  residents  of  the  State  in  the  year  preceding  the  assessment. 

Mutual,  fire,  marine,  and  other  insurance  companies  organized  under  the  laws 
of  the  State,  except  life  companies  and  those  taxed  under  the  general  corporation 
tax,  are  required  to  pay  a  tax  of  1  per  cent  on  their  receipts  for  all  premiums  and 
assessments,  subject  to  deduction  for  premiums  received  in  some  other  State  and 
taxed  in  similar  manner  there.  Companies  of  a  similar  character,  organized 
under  the  laws  of  other  States  or  countries,  pay  a  tax  of  2  per  cent  on  all 
premiums  received  for  the  insurance  of  property  or  received  by  agents  within  the 
State. 

All  taxes  on  insurance  companies,  except  on  those  taxed  on  their  corporate 
franchise,  pass  to  the  treasury  of  the  State  without  distribution. 

Insurance  tax,  1896  and  1898. 


Subjects  of  taxation. 

Values. 

Tax. 

Tax  on  life  policies  1896 

$68  499  367 

$171  248 

Tax  on  premiums,  1896  

16,  066,  540 

268,  356 

Total  to  the  State 

439  604 

Life  insurance  1898          .  . 

77,209  204 

193  023 

Insurance  premiums,  1898  

16,  855,  384 

285,  178 

Total 

478  201 

20 


INDUSTRIAL    COMMISSION. 


INHERITANCE  TAX. 

A  State  tax  is  levied  on  all  property  passing  to  collateral  heirs  in  any  manner, 
after  the  death  of  the  grantor,  except  that  passing  to  or  for  the  use  of  charitable, 
educational,  or  religious  institutions,  the  property  of  which  is  exempt  by  law 
from  taxation,  and  except  in  cases  where  the  estate  does  not  exceed  $10,000  after 
the  payment  of  all  debts,  and  excepting  legacies  or  distributive  shares  of  §500  or 
less.  Property  passing  to  direct  descendants  and  near  relatives  of  deceased  per- 
s*bns  is  not  subject  to  this  tax.  These  taxes  pass  to  the  State  treasury.  The  rate 
is  5  per  cent  on  the  market  value  of  all  property  thus  passing. 

Amount  of  collateral  inheritance  tax. 

1894  .   . $239,368.55 

1895 419,427.11 

1896 275,573.24 

1898 563,672.00 

LIQUOR  LICENSE  TAX. 

Taxes  are  imposed  upon  the  privilege  of  selling  liquors  within  the  State,  divided 
into  several  different  classes  with  graded  rates,  and  apportioned!  between  the  city 
or  town  in  which  the  license  is  granted  and  the  State,  the  former  receiving  three- 
fourths  and  the  latter  one-fourth  of  the  tax. 

The  amount  of  this  tax  to  the  Commonwealth,  being  one-fourth  of  the  whole,  was: 

1895 $682,099.36 

1896 669,602.17 

1898. ..  .f..  769,834.25 

The  principal  sources  of  taxation  for  the  Commonwealth  of  Massachusetts  may 
be  summarized  as  follows: 

1.  General  property  tax,  1896.. $1,745,340 

2.  Corporation  taxes: 

(a)  General  corporation  tax " 1, 075, 030 

(6)  Bank  stock  tax  _ 417, 398 

(c)  Savings  bank  tax 1,291,286 

(d)  Insurance  premium  tax 267, 667 

(e)  Excise  tax  on  life  insurance  companies 171, 248 

(/)  Foreign  railroad  tax 26, 749 

(g)  Mining  companies  tax 4, 902 

(h)  Other  taxes  on  corporations 63,  Oil 

3.  Collateral  inheritance  tax _ 275, 573 

4.  License  fees: 

(a)  Liquor  licenses 669, 602 

(6)  Peddlers'  licenses _______ 22, 902 

(c)  Other  licenses f 44,576 


6,075,284 

Valuationand  taxation  of  real  and  personal  property  in  Massachusetts,  1896and  1898. 

1S96. 


Items. 

Valuation  of 
real  estate. 

Valuation  of 
personal  estate. 

Tax  on  real 
estate. 

Tax  on 

personal  es- 
tate. 

Real  estate  by  assessors 

$2  040  200  644 

$30  120  730 

Personal  estate  by  assessors  

$582,  319,  634 

$8,  398,  980 

Tax  on  polls  bv  assessors 

1  434  629 

Corporate  taxable  excess  

252,  252,  082 

3,809,004 

Nonresident  bank  stock  

71,714  368 

996,  296 

Savings-bank  deposits  taxable 

248  083  232 

1  240  439 

Massachusetts  Hospital  Life  Insurance  Co.. 

10,  163,  425 

50,  817 

Life-insurance  values  

68  499  367 

171,248 

Insurance  premiums 

16  066  540 

272  821 

Foreign  railways  

53,  498,  000 

26,  749 

Trust  companies'  deposits  

1,289,059 

•  19,398 

Mining  companies 

26  267  649 

5  211 

Gas  and  electric  light  companies'  tax  

13,  218 

Railroad    commissioners'    tax,   including 
inquest 

31,212 

Inspector  of  gas  meters  tax  

4,149 

Liquor  licenses 

2,  678,  408 

Collateral  legacies  and  successions  tax 

275  723 

Care  and  custody  of  deposits    

1,800 

Total 

2  040  200  644 

1  330  153  356 

30  120  730 

19  430,102 

Total  assessments,  $49,550,832. 


TAXATION    IN    MASSACHUSETTS. 


21 


Valuation  and  taxation  of  real  and  personal  property  in  Massachusetts,  1896  and 

1898 — Continued. 

1898. 


Items. 

Valuation  of 
real  estate. 

Valuation  of 
personal  estate. 

Tax  on  real 
estate. 

Tax  on 
personal  es- 
tate. 

Real  estate  by  assessors  

$2,  182,  596,  651 

$33  594  643 

Personal  estate  by  assessors  
Tax  on  polls  bv  assessors  

$581,  646,  133 

$8,  719,  105 
1,478  630 

Corporate  taxable  excess  

Nonresident  bank  stock 

265,  288,  808 
66  742  866 



4,  162,  375 
976  136 

Savings-bank  deposits  taxable  

255,  701,  663 

1  278  506 

Massachusetts  Hospital  Life  Insurance  Co 

11  448  792 

57  243 

Life-insurance  values  

77,  209,  204 

193  023 

Insurance  premiums  

16  855  384 

285  178 

Foreign  railways  

53,  498,  000 

26,  749 

Trust  companies'  deposits  

1,  395,  421 

21  865 

Mining  companies  

41.  632,  860 

7,785 

Gas  and  electric  light  companies'  tax 

13  215 

Railroad  commissioners'  tax,  including  in- 
quests 

32  252 

Inspector  of  gas  meters  tax  

4  101 

Liquor  licenses 

3  079  337 

Collateral  legacies  and  successions  tax 

563  672 

Care  and  custody  of  deposits  

l'800 

Tax  for  special  commission  on  street  rail- 
ways   

6  502 

Total 

2  182  596  651 

1  371  419  131 

33  594  643 

20  907  474 

Total  assessments,  $54,502,117. 

NATURE  OF  PERSONAL  PROPERTY  TAXED. 

The  total  amount  of  personal  property  assessed  is  easily  obtainable  from  the 
official  publications  of  the  State,  but  information  as  to  the  different  kinds  of  per- 
sonalty taxed  is  not  obtainable  from  those  sources,  and  is  obtained  with  difficulty. 
By  particular  inquiry  the  tax  commission  of  1897  acquired  much  valuable  informa- 
tion upon  this  subject. 

The  total  assessed  property  in  the  State  in  1896  was  $2,622,520,278,  of  which 
$2,040.200,644  was  real  estate,  and  but  $582,319,634  personal  property,  the  propor- 
tion being,  roughly  speaking,  4  to  1. 

There  is  a  remarkable  variation  in  the  ratio  of  personalty  to  the  total  assessed 
valuation  among  the  different  cities  and  towns  and  in  the  State  at  large.  Manu- 
facturing cities,  from  the  valuation  of  machinery,  show  a  large  percentage  of  per- 
sonalty; other  cities  a  smaller  percentage,  according  to  the  information  obtained 
by  the  commission.  In  4  towns  the  personalty  assessed  is  less  than  5  per  cent  of 
the  total  valuation;  in  a  few  more  it  is  less  than  10  per  cent,  and  in  a  considerable 
number  less  than  15  per  cent  of  the  total,  while  in  16  towns  the  personal  property 
assessed  by  local  assessors  is  40  per  cent  of  the  total  valuation. 

An  attempt  was  also  made  by  the  commission  referred  to  to  ascertain  the 
various  kinds  of  personalty  assessed,  dividing  it  into  2  classes,  tangible  and  intan- 
gible, and  classifying  each. 

In  the  cities  (except  Boston  and  Somerville) ,  the  assessed  personalty  was  classi- 
fied as  follows  in  1896: 
Tangible  personalty: 

Stock  in  trade , $35, 964, 749 

Machinery 77, 338, 741 

Furniture  and  carriages 6,561,177 

Live  stock 6, 357, 015 

Ships  and  vessels 1, 872. 658 

Other  tangible  property 1, 669^  197 

Total $129,763,537 

Intangible  personalty: 

Money  on  hand  and  at  interest. .. 2, 070, 766 

Securities  and  investments 22, 810, 714 

Income 3,880,220 

Other  intangible  personalty 36, 258, 481 

Total 65,020,181 


Total  personal  property. 194, 783, 718 


22  INDUSTRIAL    COMMISSION. 

In  these  cities  the  tangible  personal  property  was  in  the  ratio  of  2  to  1  of  the 
intangible. 

The  classification  of  tangible  personalty  is  somewhat  accurate  and  reliable,  but 
that  of  intangible  property  evidently  signifies  nothing.  Personalty  of  this  char- 
acter is  assessed  almost  entirely  by  estimate  or  •'  doomage  "  in  a  lump  sum  and 
designated  as  "  cash  assets,"  "  securities,"  "investments,"  etc.,  the  separation  of 
various  kinds  being  nominal.  In  Boston  and  Somerville  no  accurate  data  were 
obtainable.  From  estimate  and  inference  the  commission  concludes  that  the 
excess  of  tangible  assessed  property  over  intangible  is  less  marked  in  those  cities 
than  in  other  cities  of  the  State. 

In  the  towns  of  the  State,  with  the  exception  of  a  few  where  the  conditions  are 
peculiar  in  that  respect,  the  proportion  of  tangible  to  intangible  personalty  is  also 
about  2  to  1.  In  the  few  exceptional  towns  referred  to,  where  intangible  person- 
alty crowds,  the  intangible  personalty  exceeds  the  tangible  in  the  familiar  ratio 
of  16  to  1. 

In  practice  the  assessment  of  the  various  kinds  of  tangible  personalty,  such  as 
live  stock,  vessels,  stock  in  trade,  and  machinery,  is  made  by  estimate  rather  than 
return,  upon  the  discretion  and  judgment  of  the  local  assessors  and  upon  varying 
standards  and  methods,  resulting  in  the  usual  inequality. 

In  the  country  there  is  a  more  general  and  uniform  assessment  and  valuation 
of  this  class  of  property  than  in  the  towns  and  cities,  and  it  is  fairly  satisfactory 
in  its  working.  Indeed,  the  commission  says  all  authorities  agreed  that  the  gen- 
eral property  tax,  which  was  first  put  into  effect  in  the  country  under  industrial 
conditions  very  similar  to  those  which  are  now  found  in  a  farming  town,  works 
well  under  these  conditions,  but  becomes  more  and  more  difficult  of  satisfactory 
application  as  property  becomes  larger  in  quantity  and  more  complex  in  character; 
hence  in  the  larger  towns  and  cities  of  diversified  industries  in  actual  practice 
the  taxation  of  these  forms  of  personalty  is  difficult,  and  varies  as  between  differ- 
ent places,  the  difficulties  and  divergences'  being  part  of  the  general  difficulty  of 
applying  any  general  property  tax. 

The  taxation  of  stock  in  trade  in  towns  and  cities  by  estimate,  with  the  oppor- 
tunity for  correction  by  formal  sworn  return  and  informal  conference,  while 
entirely  unreliable,  diversified,  and  incomplete,  is  regarded  by  the  commission  as 
working  better  and  resulting  in  less  injustice  than  would  a  system  of  rigidly 
enforced  returns. 

,  No  deduction  from  the  assessed  stock  in  trade  is  allowed  for  debts,  which  is 
commended  as  avoiding  fraud  and  evasion.  It  is  related  as  a  striking  fact  that 
in  the  investigations  of  commissions  and  evidence  brought  before  committees  of 
the  general  court  no  complaint  is  made  by  business  men  as  to  the  working  of  this 
part  of  the  tax  system.  Whether  complaint  is  made  by  other  classes,  who  have 
different  kinds  of  property  subject  to  taxation,  is  not  stated. 

The  taxation  of  machinery  is  made  in  the  same  manner  and  with  the  same  gen- 
eral results.  Because  of  the  dependence  of  Massachusetts  upon  its  manufacturing 
industries,  the  doubtful  value  of  machinery,  its  rapid  depreciation,  sudden 
changes  in  value  from  improvements  and  new  inventions,  the  commission  con- 
cludes that  it  would  be  advisable  to  exempt  it  from  taxation  entirely,  and  recom- 
mends that  it  be  done  as  soon  as  convenient  substitutes  can  be  found  for  the 
revenue  now  derived  therefrom. 

It  is  clear  that  tangible  personalty  upon  the  whole  is  but  partially  and  unequally 
taxed.  The  taxation  of  intangible  personal  property,  such  as  notes,  stocks,  bonds 
etc.,  in  which  the  State  is  particularly  rich,  is  most  unsatisfactory. 

While  the  law  permits  sworn  statements  of  taxables,  and  a  limited  number  are 
made,  in  practice  these  taxes  are  usually  assessed  by  estimates  or  "doomage." 
Sworn  statements  when  made  are  often  false,  and  perjury  is  committed  for  the 
sake  of  evading  or  reducing  taxation.  Hence  in  a  complicated  society,  with  a  mass 
of  varied  investments  ramifying  in  all  directions,  the  taxation  of  intangible  per- 
sonalty is  in  a  high  degree  uncertain,  irregular,  and  unsatisfactory.  It  rests 
mainly  upon  guesswork,  and  is  demoralizing  alike  to  taxpayers  and  tax  officials. 
The  commission  says  that  the  fact  that  the  great  bulk  of  intangible  property 
taxable  by  law  is  not  reached  is  admitted  on  all  hands,  and  that  ineffectual  as 
the  taxation  of  securities  is,  its  weight  is  nevertheless  felt  both  as  an  actual  bur- 
den and  as  an  imminent  possibility:  that  the  taxation  of  personal  property  in  the 
form  of  securities  and  investments  is  a  failure,  incomplete  and  uncertain,  not  pro- 
portional to  means  as  between  individuals,  and  grossly  unequal  in  its  effects  in 
different  parts  of  the  State;  that  the  experience  of  Massachusetts  in  this  regard  is 
the  same  as  that  of  the  other  States  of  the  Union;  that  everywhere,  without  excep- 
tion, the  testimony  is  that  this  part  of  the  system  of  the  general  property  tax  is 
unequal,  unsuccessful,  often  demoralizing  to  tax  officials,  always  irritating  to 
taxpayers. 


TAXATION    IN    MASSACHUSETTS.  23 

The  experience  of  Massachusetts  in  this  respect  is  regarded  as  the  more  striking 
because  there  the  difficulty  does  not  lie  mainly  in  the  administration  of  the  tax 
laws,  because  the  assessors  are  usually  honest,  competent,  and  zealous.  While 
in  other  States  there  are  grave  abuses  and  corrupt  laxity,  in  this  State  the  standard 
of  public  duty  continues  to  be  high,  the  assessors  intelligent  and  experienced, 
and  the  cause  of  failure  is  not  in  official  dereliction,  but  lies  in  the  system  itself. 

It  is  maintained  on  one  hand  that  the  difficulty  lies  in  the  method  of  valuation 
and  assessment  of  such  property  by  local  assessors,  and  that  the  remedy  is  to  be 
found  in  more  stringent  assessment  by  State  officials  at  some  uniform  rate;  and 
on  the  other  hand,  that  the  whole  system  is  bad,  irrespective  of  the  complication 
arising  from  local  assessment;  that  the  taxation  of  securities  involves  double 
taxation,  is  unjust,  and  in  any  case  impossible  of  satisfactory  execution  by  local 
or  State  officials. 

The  commission,  in  discussing  the  taxation  of  foreign  securities  in  the  hands  of 
citizens  of  the  Commonwealth,  expresses  the  opinion  that  the  method  of  taxing 
such  securities  as  property  within  the  State  is  taxed  is  bad  in  principle  as  well 
as  ineffective  in  practice,  and  that  while  such  citizens  should  be  required  to  con- 
tribute in  some  way  to  the  public  burdens — not  with  respect  to  the  property 
represented  by  such  securities,  but  with  respect  to  the  income  therefrom — they 
should  not  be  taxed  on  the  securities  in  the  same  manner  as  if  they  held  property 
in  the  State.  It  is  pointed  out  that  the  attempt  to  enforce  such  taxation  by  the  rig- 
orous and  drastic  measures  frequently  proposed  would  not  only  be  ineffectual 
upon  such  an  elusive  form  of  property,  but  to  the  extent  accomplished  would  be 
double  taxation  and  unjust;  that  with  the  rate  of  interest  upon  such  securities  not 
exceeding  44-  per  cent,  and  the  average  rate  of  local  taxation  14  per  cent,  the 
taxation  amounts  to  one-third  of  the  entire  income,  while  no  civilized  country  in 
ordinary  times  has  ever  imposed  with  success  an  income  tax  of  more  than  3,  or  at 
most  5,  per  cent;  that  such  a  taxation  results  in  general  evasion  and  perjury,  and 
that  the  taxation  of  such  securities  by  rigid  sworn  returns  is  most  demoralizing 
and  ineffective:  that  the  method  of  local  assessment  is  not  the  root  of  the  evil, 
but  that  the  fundamental  cause  is  the  futile  endeavor  to  tax  securities — mere 
evidences  of  ownership  of  property — by  the  same  methods  and  at  the  same  rate 
as  tangible,  visible  property. 

RECOMMENDATIONS  OF  THE  TAX  COMMISSION. 

The  commission  therefore  proposes  a  radical  change  in  existing  methods,  and 
recommends  that  all  securities  and  evidences  of  debt  representing  ownership  or 
interest  in  property  outside  the  State  be  not  subject  to  the  general  tax  on  prop- 
erty. This,  they  say,  would  do  away  with  all  questions  of  double  taxation  and 
administrative  difficulties  and  make  the  legislation  of  the  State  with  respect  to 
such  securities  consistent  with  itself. 

With  this  recommendation  the  commission,  recognizing  the  injustice  and 
inequality  of  exempting  the  holders  of  securities  and  obligations  from  taxation 
and  the  necessity  of  requiring  some  contribution  to  the  taxes  of  the  State  in 
some  reasonable  proportion  to  means,  is  impelled  to  the  consideration  of  sub- 
stitutes for  such  tax. 

Considering  a  tax  upon  income  as  such  substitute,  while  recognizing  such  a  tax 
as  in  principle  the  most  equitable  that  could  be  devised,  and  in  practical  working 
preferable  to  the  present  system,  the  difficulty  under  present  conditions  of  admin- 
istering such  a  tax  with  certainty  and  equality  of  treatment  as  between  different 
taxpayers  is  thought  to  be  too  great  to  warrant  the  recommendation  of  its  adop- 
tion. The  commission  fails,  however,  to  present  any  forcible  or  logical  reasons 
or  argument  to  justify  the  assumption  that  such  a  tax  levied  by  State  authorities 
by  reasonable  methods  would  be  impractical  in  its  results,  or  the  apprehension 
expressed  that  it  would  result  in  evasion  and  concealment  to  so  great  an  extent 
as  to  render  it  ineffectual  and  deservedly  unpopular. 

The  commission  seems  to  magnify  the  objection  to  requiring  from  the  holder 
of  such  securities  a  statement  or  return  for  taxation,  such  as  would  not  appear 
objectionable  in  business  as  a  basis  for  credit,  and  to  £e  oversolicitous  of  the 
feelings  of  those  whose  sensitiveness  is  principally  aroused  by  the  desire  to  dodge 
taxation. 

Animated  by  this  objection,  which  is  regarded  with  undue  seriousness,  the  com- 
mission seeks  for  a  substitute  for  the  taxation  of  such  securities  and  obligations 
which  would  obviate  the  necessity  of  rigorous  methods  for  discovery  of  property 
by  returns. 

Referring  to  the  Pennsylvania  method — designated  as  a  compromise  policy,  in 
its  effect  not  far  from  a  State  income  tax  on  securieties — of  taxing  such  securities 
at  the  uniform  rate  of  4  mills  on  each  dollar  of  the  value,  or  $4  on  each  $1,000  of 


24  INDUSTRIAL    COMMISSION. 

value,  the  commission  concludes  that  its  practical  working  in  that  State  is  not 
satisfactory,  and  expresses  the  opinion  that  this  method  offers  no  advantages 
over  that  of  a  State  income  tax. 

The  Connecticut  method  of  taxing  such  securities — subjecting  them  to  a  uni- 
form State  tax  of  $2  per  §1,000  of  value  by  registration — is  also  considered,  but 
while  some  advantages  are  conceded,  it  is  not  regarded  as  satisfactory  in  its 
operation  or  results. 

The  commission,  in  its  search  for  methods  of  taxation  of  such  property  owners 
which  would  relieve  them  from  a  declaration  and  yield  more  certain  and  uniform 
contributions  of  revenue,  recommends  two  modes  as  feasible  and  avoiding  the 
objections  referred  to;  namely,  the  extension  of  the  existing  inheritance  tax  to 
yield  a  substantial  increase  in  revenue,  and  a  tax  on  occupants  of  habitations,  or 
a  tax  on  presumed  or  estimated  income  based  on  the  expenditure  of  the  taxpayer 
for  dwelling-house  purposes.  It  proposes  a  graded  tax  on  all  persons  occupy- 
ing dwellings  of  an  annual  rental  value  exceeding  $400,  and,  in  view  of  this  tax,  the 
abolition  of  the  present  tax  on  incomes  "from  professions,  trade,  or  employment." 
These  further  innovations  upon  the  "  simple  system  of  the  general  property  tax" 
are  proposed  for  the  commendable  purpose  of  securing  still  greater  variety  in  the 
methods  of  taxation,  to  correspond  with  the  growing  complexity  in  the  owner- 
ship and  distribution  of  wealth.  It  is  suggested  that  if  the  changes  recommended 
were  made  and  followed  in  other  States  as  well,  they  would  avoid  double  taxation 
and  result  for  the  country  as  a  whole  in  a  sound  and  consistent  system  of  local 
and  State  taxation. 

The  commission  finally  recommends  the  abolition  of  existing  taxes  on  intangible 
personalty,  such  as  stocks,  bonds,  and  loans  on  mortgages,  the  inheritance  and 
habitation  taxes  being  relied  upon  to  yield  an  equivalent  revenue. 

MINORITY  REPORT. 

One  member  of  the  commission  presented  an  elaborate  and  characteristic 
minority  report,  vigorously  opposing  most  of  the  recommendations  of  the 
majority. 

The  difference  in  the  positions  of  the  respective  branches  of  the  commission 
upon  fundamental  propositions  apparently  arises  from  the  fact  that  they  occupy 
different  view  points  as  to  the  nature  of  the  general  property  tax  system  as  applied 
to  the  industrial  and  property  conditions  existing  in  the  Commonwealth. 

Both  are  animated  by  the  same  commendable  purpose — the  attainment  of  the 
greatest  possible  degree  of  justice  and  equality  in  the  practical  application  of  a 
system  of  taxation. 

Both  evidently  agree  upon  the  essential  principles  of  taxation,  but  the  majority 
is  apparently  moved  by  a  sense  of  the  inadequacy  of  existing  methods  alone  to 
provide  a  practical  operation  of  those  principles,  while  the  minority  evidently  has 
abounding  faith  in  the  efficiency  of  the  system  if  properly  supplemented  and 
enforced  by  legislation  and  correct  administration. 

The  majority  recognizes  the  necessity  of  adopting  other  methods  in  conjunc- 
tion with  those  existing  for  the  assessment  and  taxation  of  certain  kinds  of  cor- 
porate and  intangible  property,  which  it  assumes  can  not  be  properly  reached 
through  existing  methods  alone,  while  the  minority  affirms  the  efficiency  of  the 
present  system  through  proper  administration  to  reach  for  taxation  all  kinds  of 
property. 

The  majority  is  apparently  impelled  to  the  conclusion  that  the  principle  of 
self -assessment  of  taxables  through  verified  property  statements,  supplemented 
by  coercive  measures  for  its  enforcement,  and  the  self -assessment  of  townships  and 
wards  by  the  competitive  valuation  method,  have  proven  utter  failures  in  the 
practical  experience  of  States,  while  the  minority  is  impressed  with  the  conviction 
that  the  success  of  these  methods  is  a  question  of  proper  administration. 

Brief  reference  to  some  of  the  points  in  his  report  will  suffice  to  indicate  his 
views  and  his  trend  of  thought  upon  the  subject  of  taxation;  and  inasmuch  as  he 
voices  the  sentiment  of  a  large  class  of  people  active  in  the  advocacy  of  their 
opinions,  such  reference. may  not  be  out  of  place  in  this  report. 

His  conviction  that  every  taxable  should  be  compelled  to  contribute  to  the  sup- 
port of  government  and  society  according  to  his  ability,  and  that  ability  to  con- 
tribute is  justly  measured  by  the  value  of  his  property,  in  whatever  form  it  exists, 
is  unyielding.  He  exhibits  no  patience,  leniency,  or  toleration  towards  the  "  tax- 
dodging  constituency,"  and  his  policy  is  that  of  compulsory  equality  of  taxation 
by  uniform  assessment  and  taxation  of  all  kinds  of  property  through  coercive 
measures. 


TAXATION   IN    MASSACHUSETTS.  25 

The  way  to  reduce  the  tax  rate  without  increasing  the  tax  valuation,  he  says,  is 
simply  to  secure  the  payment  of  the  tax  upon  property  that  escapes.  He  vigor- 
ously protests  that  the  present  tendency,  as  shown  in  the  demands  for  exemption 
from  taxation  of  those  who  have  the  most  of  the  world's  wealth,  rests  upon  the 
theory  that  the  prosperity  of  the  State  is  in  direct  proportion  to  the  exalted  priv- 
ileges of  the  few.  He  inveighs  against  that  tendency  and  urges  that  "  Massachu- 
setts should  stand  as  the  conserver  of  her  ancient  rights  and  privileges,  and  should 
insist  upon  a  system  of  equal  taxation,  exempting  only  the  poor,  the  unfortunate, 
the  aged,  and  such  institutions  as  shall  best  advance  the  interests  of  the  whole 
people." 

He  favors  the  taxation  of  securities  of  all  kinds,  contending  that  they  are  not 
merely  evidences  of  property,  but  actual  property  to  all  intents  and  purposes, 
subject  to  transfer  and  sale,  and  that  the  taxation  of  such  property  is  not,  in  the 
proper  sense  of  the  term,  "  double  taxation."  He  opposes  the  abolition  of  this  tax 
and  favors  its  enforcement  by  drastic  penal  measures,  bitterly  condemns  evasion 
and  tax  dodging  on  the  part  of  citizens,  and  characterizes  one  who  by  willful 
concealment  evades  his  tax  as  "  a  lawbreaker  with  malice  prepense. " 

"  The  man  who  refused  to  pay  his  poll  tax  was  incarcerated  for  his  refusal,  and 
the  common  people,  unlearned  in  tax  theories,  might  well  ask:  Why  should  not 
the  millionaire  who  evades  the  tax  be  liable  to  as  severe  a  penalty?" 

He  recommends  that  the  "vast  sums,  escaping  taxation  through  imposition 
upon  the  generous  provisions  of  the  State"  by  deposits  in  savings  banks  favored 
in  taxation  should  be  reached,  and  that  amounts  on  deposit  exceeding  $500  be 
taxed  above  the  present  reduced  rate. 

He  maintains  in  sweeping  generalities  that  intangible  personalty  should  be 
taxed  as  all  other  property,  and  that  a  system  should  be  adopted  to  prevent  its 
escape,  to  the  end  that  the  State  might  enjoy  a  rate  so  low  that  one  class  would 
not  be  burdened  with  the  weight  of  the  taxes  of  others. 

He  agrees  with  his  associates  that  "  the  great  bulk  of  intangible  properties  do 
escape  taxation,"  and  has  much  to  say  about  the  "  privileged  classes"  who  own 
such  property  and  the  power  of  the  State  to  "  compel  obedience  to  the  law." 

He  commends  the  sound  sense  of  the  Maine  commission  of  1899:  "  We  have  no 
sympathy  with  the  idea  that  because  some  men  will  defraud  the  revenue,  because 
they  will  conceal  property,  commit  perjury,  and  resort  to  all  conceivable  trickery 
to  prevent  taxation,  therefore  the  whole  classes  of  property  which  they  would 
thus  hide  from  the  assessor  should  be  exempted  by  law." 

He  gives  little  consideration  to  the  substitution  of  other  methods  for  the  taxa- 
tion of  such  persons  and  property,  but  insists  that  they  shall  be  actually  taxed 
through  present  methods. 

He  proceeds  to  show  by  statistics  that  the  personal  property  of  the  city  and 
State  subject  to  taxation  is  at  least  twice  the  value  of  the  real  estate,  and  that  on 
the  basis  of  2,040  millions  of  realty  assessed  in  1896,  the  personalty  should  have 
been  4,080  millions,  or  2,750  millions  more  than  was  actually  taxed. 

On  a  total  taxation  of  $38,519,570  of  that  year  the  added  assessment  of  even 
2,000  millions  of  intangible  personalty  would  have  reduced  the  rate  to  about  $8.50 
per  $1,000. 

He  attributes  such  escape  of  property  from  taxation  to  the  laxity  of  the  laws 
and  not  to  the  system  in  force,  and  favors  compulsory  statements  as  the  remedy. 

He  favors  the  taxation  of  real-estate  mortgages  and  denies  that  the  exemption 
of  the  mortgage  in  the  hands  of  the  holder  would  relieve  the  owner  of  the  land 
by  a  corresponding  diminution  of  interest,  as  the  rate  of  interest  depends  upon 
many  other  things  than  the  rate  of  taxation. 

He  undertakes  to  prove  by  statistics  that  mortgage  rates  of  interest  show 
no  greater  decline  where  these  securities  are  relieved  from  taxation,  and  that 
mortgage  exemption  causes  no  appreciable  reduction  of  interest  charges  to  the 
borrower. 

He  does  not  favor  State  assessment,  but  recommends  "  no  new  departure  from 
the  ancient  policy  of  the  State  '  to  tax  all  men  according  to  the  measures  of  their 
ability,'  but  rather  to  complete  the  system  now  in  operation  by  such  amendments 
as  shall  adapt  our  policy  to  the  more  complicated  conditions  of  our  time." 

REPORT  OF  THE  LEGISLATIVE  COMMITTEE. 

A  special  committee  on  taxation,  consisting  of  4  members  of  the  senate  and  11 
members  of  the  house  of  the  Massachusetts  legislature,  was  appointed,  to  which 
were  referred  the  recommendations  of  both  the  majority  and  minority  reports  of 
the  special  commission  above  set  forth,  and  various  bills  submitted  for  carrying 
out  such  recommendations. 


26  INDUSTRIAL    COMMISSION. 

The  recommendations  of  the  majority  were  briefly  as  follows: 

1.  An  inheritance  tax  upon  both  realty  and  personalty  of  5  per  cent,  exempting 
estates  not  exceeding  $10,000,  and  abating  $5,000  on  estates  between  $10,000  and 
$25,000,  the  revenue  to  be  divided  between  the  State  treasury  and  local  districts. 

2.  A  tax  on  occupiers  in  proportion  to  house  rentals,  only  the  excess  over  $400 
rental  being  taxable. 

3.  Abolition  of  the  present  taxes  on  intangible  personalty,  such  as  stocks,  bonds, 
loans  on  mortgages,  and  incomes,  the  tax  under  1  and  2  being  relied  on  to  yield  at 
least  as  much  as  is  now  secured  from  this  source. 

4.  Assumption  by  the  State  treasury  of  county  expenses. 

5.  Appropriation  by  the  State  of  the  revenue  from  taxes  on  corporate  excess 
now  distributed  among  the  several  cities  and  towns. 

The  minority  report  protested  against  the  removal  of  the  tax  on  intangible  prop- 
erty as  putting  all  the  burdens  of  taxation  on  the  poor  and  active  and  exempting  the 
rich,  and  as  being  unconstitutional  class  legislation;  condemned  the  house-rental 
tax,  and  opposed  the  redistribution  of  county  expenses.  The  positive  recommenda- 
tions were  the  taxation  of  intangible  personal  property  like  all  other  property,  and 
the  adoption  of  a  rigid  system  to  prevent  its  escape.  In  detail,  it  advocated  the 
increased  taxation  of  savings  banks  deposits  in  excess  of  $l,000fthe  taxation  of 
mortgages,  and  incidentally  the  prohibition  of  covenants  by  borrowers  to  assume 
and  pay  taxes  on  mortgages;  a  tax  on  personal  property  at  a  uniform  rate  through- 
out the  State,  to  be  determined  by  the  average  rate  of  the  previous  year,  the  per- 
sonal tax  to  be  doubled  when  sworn  returns  are  not  filed,  such  tax  to  be  laid  by 
the  tax  commissioner,  assisted  by  a  corps  of  State  assessors,  with  power  to  control 
local  assessments,  who,  when  not  otherwise  employed,  are  to  seek  for  the  discovery 
of  concealed  personal  property  and  the  detection  and  punishment  of  those  making 
false  returns .  In  view  of  the  experience  of  enlightened  foreign  nations ,  a  graduated 
inheritance  tax  was  favored  for  additional  revenue,  but  not  as  a  means  of  exempt- 
ing intangible  property. 

The  report  of  the  special  tax  commission  was  given  most  careful  consideration, 
and  the  committee  held  many  hearings  and  heard  a  large  number  of  witnesses 
both  for  and  against  the  proposed  recommendations.  The  committee  says  in  its 
report  that  there  was  no  evidence  from  the  attendance  upon  the  hearings  of  any 
widespread  feeling  of  dissatisfaction  upon  the  part  of  the  taxpayers  with  the 
existing  system. 

The  case  of  the  petitioners,  so  called,  or  those  who  desired  a  change  in  the  exist- 
ing laws  and  approval  of  the  recommendations  in  the  majority  report  of  the  tax 
commission,  was  ably  conducted  by  the  counsel  of  the  Anti-Double  Taxation 
League,  having  a  membership  of  1,000  citizens  of  Massachusetts  especially 
interested  in  the  abolition  of  the  present  taxes  on  intangible  personalty  proposed 
by  the  majority.  The  testimony  came  chiefly  from  those  who  had  made  a  specialty 
of  the  subject  and  had  very  positive  views  upon  the  proposed  changes,  and  the 
arguments  made  in  favor  of  such  changes  displayed  great  learning  and  ability. 
Among  the  numerous  witnesses  representing  various  classes  of  property  were 
representatives  of  mining  companies  having  large  sums  of  money  deposited  in 
local  banks  and  whose  offices  were  in  Boston,  although  many  of  the  companies 
were  organized  in  other  States,  who  testified  that  if  their  stockholders  were 
reached  and  taxed  it  would  be  necessary  for  them  to  leave  the  State;  that  the 
royalties  and  franchise  taxes  in  other  States  were  considerable  and  the  taxation 
of  stock  there  would  be  double  taxation;  that  the  State  could  compel  them  to 
furnish  a  list  of  shareholders  (a  bill  for  that  purpose  having  been  introduced) , 
and  if  such  a  law  were  passed  they  would  move  their  offices  from  the  State. 

The  remonstrants  against  the  changes  proposed  by  the  majority  report  were 
made  up  largely  of  those  who  had  studied  the  subject  and  had  very  decided  opin- 
ions upon  it,  of  assessors,  who  were  practically  a  unit  against  them,  representatives 
of  farming  interests,  and  mayors  and  solicitors  of  several  cities  of  the  Common- 
wealth; and  able  and  learned  arguments  were  also  made  against  the  proposed, 
changes. 

The  committee  also  gave  careful  consideration  to  the  views  and  opinions  of 
economists  and  writers  upon  the  subject  of  taxation,  and  sought  light  upon  the 
difficult  subject  in  every  direction  by  exhaustive  study  and  investigation. 

A  most  notable  feature  of  the  hearings  was  the  wide  divergence  in  the  opinions 
and  views  of  witnesses  and  counsel  upon  the  subject  of  taxation  and  the  positive- 
ness  and  tenacity  with  which  such  diametrically  opposite  views  were  advocated. 

The  nature  and  sources  of  the  testimony  given,  coming  principally  from  stu- 
dents, theorists,  and  assessors,  comparatively  little  being  heard  from  taxpayers 
generally,  suggested  to  the  committee  the  probability  that  the  truth  might  lie 
between  the  extremes  presented  chiefly  on  theoretical  grounds,  and  led  to  a 


TAXATION    IN    MASSACHUSETTS.  27 

most  careful  examination  of  the  existing  system  as  it  affects  the  great  mass  of 
taxpayers. 

The  committee  says  that  looking  at  the  situation  broadly,  and  considering  taxa- 
tion as  the  art  of  raising  necessary  public  revenue  fairly  and  in  a  manner  not 
only  proportional  but  reasonable,  rather  than  as  the  exact  science  of  finding 
every  bit  of  property  and  extracting  from  it  the  largest  possible  tax  by  strict 
logical  rules,  it  may  be  questioned  whether  the  strictures  upon  the  present  sys- 
tem, from  theorists  upon  the  one  side  and  assessors  on  the  other,  are  as  deserved 
as  might  at  first  appear.  A  considerable  revenue  is  collected,  the  committee  says, 
from  the  tax  on  intangible  property,  and  no  general  complaint  was  made  by  those 
who  pay  taxes  out  of  proportion  to  what  others  pay.  The  conclusion  was  that 
the  undeniable  defects  in  the  present  system  ought  not  to  be  needlessly  exag- 
gerated, and  that  the  Commonwealth  should  be  very  slow  to  overturn  its  methods 
of  taxation  on  no  better  ground  than  that  they  are  not  ideal  or  perfect. 

In  a  conservative  and  practical  spirit  the  features  of  the  various  changes  pro- 
posed were  considered  and  discussed  from  the  standpoint  of  practical  successful 
legislation,  in  the  light  of  the  circumstances  which  exist  among  the  people  and 
the  industrial  and  political  conditions  existing  in  the  Commonwealth. 

Considering  the  views  of  the  extreme  advocates  of  opposing  views  among  wit- 
nesses the  committee  says:  "  When  the  practical  assessor  is  consulted  for  what  is, 
and  the  theoretical  economist  for  what  ought  to  be,  it  is  learned  from  the  econo- 
mist that  what  the  assessor  wants  ought  not  to  be,  and  from  the  assessor  that 
what  the  economist  wants  already  exists." 

The  committee,  believing  that  the  majority  report  of  the  special  tax  commis- 
sion should  be  accepted  or  rejected  as  a  whole,  refused  to  recommend  its  adoption 
as  a  substitute  for  the  existing  system  of  taxation.  The  abolition  of  the  present 
tax  on  intangible  personalty  could  not  be  recommended  unless  some  less  objection- 
able substitute  were  provided  which  would  yield  the  required  revenue. 

The  proposed  habitation  tax  was  regarded  as  open  to  many  objections,  as  a 
sumptuary  law  that  would  fall  especially  upon  the  most  deserving  class  in  the 
community,  discourage  marriage  and  residence  in  Massachusetts,  and  above  all 
place  an  excessive  burden  upon  the  home,  the  creation  and  maintenance  of  which 
are  of  the  highest  importance  to  the  well-being  of  the  community.  It  would  bear 
disproportionately  upon  those  with  moderate  means,  and  its  constitutionality  was 
questionable. 

The  inheritance  tax  of  5  per  cent  on  both  realty  and  personalty  was  regarded  as 
objectionable,  and  an  inheritance  tax  on  personalty  alone  at  a  rate  which  would 
not  be  burdensome  would  not  afford  an  adequate  substitute  for  the  loss  of  revenue 
which  would  result  from  the  exemption  of  intangible  personalty. 

The  committee  was  unable  to  report  favorably  upon  any  of  the  recommenda- 
tions proposed  in  the  minority  report  for  the  stricter  enforcement  of  existing 
laws,  and  did  not  approve  of  the  act  providing  for  the  State  assessment  of  per- 
sonalty. It  was  also  opposed  to  the  graduated  inheritance  tax. 

In  regard  to  the  petition  of  the  Anti-Double  Taxation  League,  providing  for  the 
exemption  from  taxation  in  the  Commonwealth  of  personal  property  situated  and 
taxed  without,  and  shares  of  certain  corporations  organized  under  the  laws  of 
other  States,  but  owned  in  Massachusetts,  the  committee  said  that  in  so  far  as  it 
would  exempt  the  taxation  of  personal  property,  such  as  stock  in  trade,  cattle,  and 
property  of  like  nature  already  taxed  in  other  States,  it  was  not  open  to  serious 
objection,  but  it  was  thought  that  the  evil  was  not  of  sufficient  magnitude  to  jus- 
tify legislation  upon  the  subject,  in  view  of  the  complications  which  would  follow. 
To  the  proposed  exemption  of  shares  of  foreign  corporations  owned  within  the 
State  serious  objections  were  found. 

In  announcing  its  conclusions  that  it  could  not  reccommend  any  legislation 
introducing  fundamental  changes  in  the  present  law  or  any  radical  changes  in 
the  administration  of  the  law  as  it  existed,  the  committee  recognized  the  disap- 
pointment likely  to  be  felt  by  both  sides,  and  stated  that  the  committee  did  not 
feel  called  upon  to  originate  any  legislation,  but  concerned  itself  with  the  consid- 
eration of  the  commission's  report,  with  the  result  stated;  that  changes  in  laws  so 
vital  to  the  well-being  of  the  community  as  those  of  taxation  must  be  made  only 
after  the  most  careful,  painstaking,  and*  deliberate  investigation;  that  such  laws 
are  the  result  of  extended  legislation,  and  the  system  one  of  growth  which  has 
more  or  less  adequately  kept  pace  with  changes  in  industrial  conditions;  that 
the  members  of  the  system  are  so  articulated  that  the  disturbance  of  one  more  or 
less  affects  all  the  States;  that  to  formulate  a  tax  system  for  a  new  community  is 
one  thing,  to  revolutionize  an  existing  system  quite  another;  and  that  legislation 
in  this  direction  should  come  only  in  response  to  a  pressing  and  widespread  demand 
for  it.  Admitting  all  alleged  defects  in  the  present  system,  the  prudent  legislator 


28  INDUSTRIAL    COMMISSION. 

must  be  confident  that  changes  proposed  will  improve  conditions  before  he  can 
recommend  them,  and  such  changes  must  come  to  meet  the  wishes  of  the  average 
opinion.  They  can  not  be  hastened  to  conform  to  the  views  of  reformers  who 
always  ride  on  the  crest  of  the  wave  of  progress,  nor  can  they  be  long  retarded 
to  avoid  offending  those  who  would  never  change  existing  conditions.  Legisla- 
tion on  the  subject  can  not  be  made  in  advance  of  public  opinion,  and  as  a  com- 
mittee they  were  not  satisfied  that  this  mandate  had  yet  been  expressed  in  favor 
of  radical  changes. 

The  committee  said  the  fact  that  no  radical  changes  were  recommended  should 
not  discourage  those  who  believe  that  existing  conditions  can  be  improved,  and 
invited  continued  agitation  on  the  subject  as  the  only  way  that  intelligent  public 
opinion  can  be  created,  in  response  to  which  changes  in  the  law  are  sure  to  be  made. 

The  reports  and  proposed  changes  in  the  taxation  laws  were  also  carefully  con- 
sidered and  discussed  in  the  assembly,  and  no  material  changes  in  the  taxation 
system  have  yet  been  made.  Thus  the  laborious  work  of  the  special  tax  com- 
mission appointed  in  recognition  of  "  the  widespread  disatisf  action  "  with  exist- 
ing laws,  composed  of  men  of  recognized  ability  and  standing,  resulting  in  the 
presentation  of  one  of  the  ablest  and  most  comprehensive  reports  ever  made  by 
a  tax  commission,  and  one  of  the  most  valuable  contributions  to  the  literature  of 
taxation,  has  thus  been  unproductive  of  direct  results  in  legislation. 

These  reports  of  the  special  tax  commission  and  of  the  joint  legislative  com- 
mittee form  a  most  valuable  study,  and  constitute  one  of  the  most  interesting 
and  instructive  chapters  in  the  modern  literature  of  taxation,  and  an  important 
object  lesson  in  the  obstacles  to  practical  reform  in  long-established  systems. 

Therein  is  clearly  and  forcibly  illustrated  the  wide  gulf  between  conception 
and  attainment;  between  scientific  theories  of  taxation  and  the  action  of  practi- 
cal legislators  upon  the  subject,  and  the  fact  that  practical  reform  in  taxation  is 
attainable  only  in  response  to  enlightened  aggressive  public  sentiment  along  prac- 
tical lines  and  under  the  direction  of  men  in  whom  are  combined  ability  and  learn- 
ing in  the  theories  of  correct  taxation,  with  a  practical  knowledge  and  experience 
in  business  and  political  affairs. 

The  practical  value  of  this  chapter  in  the  able  and  voluminous  contributions  of 
the  Commonwealth  of  Massachusetts  to  the  literature  of  taxation  induced  us  to 
give  it  so  considerable  space  in  this  report. 


CONNECTICUT. 

The  distinguishing  feature  of  the  system  of  taxation  existing  in  this  State  is  the 
entire  separation  of  State  and  local  revenues,  real  estate  and  personal  property  in 
general  being  assessed  and  taxed  locally  for  local  purposes,  and  all  State  revenues 
being  raised  by  special  taxes,  mostly  on  corporations,  and  not  by  direct  prop- 
erty tax. 

There  are  no  constitutional  limitations  or  provisions  as  to  the  power  of  taxa- 
tion, the  authority  of  the  legislature  in  respect  to  matters  of  taxation  apparently 
being  supreme. 

For  the  reason  that  there  is  no  direct. property  tax  for  State  purposes,  the  reve- 
nues of  the  State  being  raised  largely  from  special  taxes  on  corporations,  little 
need  be  said  for  our  purpose  upon  the  system  of  local  taxation. 

PROPERTY  TAX. 

In  respect  to  local  taxation,  the  general  property  tax  prevails. 

The  general  plan  of  taxing  property  was  adopted  in  1819.  Prior  to  that  time 
Connecticut  from  her  earliest  history  had  pursued  the  plan  of  taxing  incomes 
rather  than  property.  Those  engaged  in  trades  or  professions  were  assessed  on 
an  estimate  of  their  annual  incomes. 

Real  estate  was  rated  for  taxation  not  at  its  capital  value,  but  in  proportion 
to  its  estimated  annual  income. 

Lands,  as  well  as  houses  and  buildings,  were  listed  at  fixed  rates  by  statutes 
thought  to  represent,  not  values,  but  the  average  income  they  would  produce, 
thus  placing  them  beyond  the  control  of  assessors  and  preventing  opportunity  for 
evasion. 

Although  the  system  was  to  a  great  extent  changed  in  1819  to  one  of  assessment 
on  property  valuation,  the  old  theory  of  taxing  property  in  proportion  to  income 
or  productive  capacity  was  partly  kept  up  by  listing  real  estate  at  3  per  cent  and 
personalty  at  a  larger  proportion,  frequently  6  per  cent,  of  its  true  value. 

In  1850  this  distinction  between  real  and  personal  property  was  abolished  and 
all  taxable  property  was  made  ratable  at  3  per  cent  of  its  value. 

This  preserved  the  form  only  of  an  income  tax,  and  in  1860  was  abandoned  and 
replaced  by  legislative  provision  for  listing  all  property  at  its  full  value. 

Prior  to  1891  the  revenues  required  by  the  State  were  in  considerable  part  raised 
by  the  same  methods  employed  for  raising  local  taxes,  and  mingled  with  them  in 
the  direct  tax  upon  local  property.  The  result  was  the  usual  growth  of  the  evils 
of  unequal  assessment  and  escape  of  property  from  the  tax  rolls. 

While  the  statutes  require  the  assessment  of  all  taxable  property  at  the  fair  market 
value  thereof,  and  not  at  its  value  at  a  forced  or  auction  sale,  the  tax  commission 
in  its  report  of  1887  says  that  few,  if  any,  town  assessors  value  real  estate  at  what 
they  think  it  is  fairly  worth,  but,  on  the  contrary,  first  make  appraisal  of  its  actual 
value  and  then  put  it  in  the  list  at  a  certain  proportion  thereof,  varying  from  33 
to  75  per  cent;  and  that  similar  reductions  are  made  in  valuing  personal  property, 
though  with  less  uniformity  and  more  injustice. 

This  abuse  was  attributed  to  the  payment  by  each  town  of  a  State  tax  of  a  fixed 
percentage  of  its  grand  list. 

Although  no  State  tax  is  now  levied  directly  upon  property,  the  habitual  under- 
valuation of  property,  and  failure  to  assess  at  all  a  large  proportion  of  personalty, 
still  constitutes  the  most  prominent  evil  in  the  system  of  local  taxation,  which 
operates  with  special  injustice  to  the  small  property  owner  in  that  State,  accord- 
ing to  the  twelfth  annual  report  of  the  bureau  of  labor  statistics  in  1896. 

The  bureau,  in  the  report  referred  to,  reports  an  investigation  based  largely 
upon  statements  of  local  assessors  themselves,  showing  valuations  varying  from 
50  per  cent  to  100  per  cent  of  full  value,  the  average  percentage  in  the  entire 
State  being  69.6,  which,  from  the  sources  of  information,  would  obviously  be 
sufficiently  high. 

29 


30  INDUSTRIAL    COMMISSION. 

From  this  report,  very  few  of  the  assessors,  in  their  own  statement  even,  pre- 
tend to  assess  full  value,  or  100  per  cent. 

While  taxable  personal  property  that  can  be  seen  and  handled  is,  according  to 
the  reports  referred  to,  listed  and  taxed  with  great  inequality  and  discrimination, 
but  a  small  portion  of  the  intangible  property,  such  as  notes,  bonds,  book  debts, 
stocks,  mortgages,  etc.,  all  of  which  are  taxable,  has  ever  been  listed,  and  this 
portion  is  decreasing  each  year,  although  such  property  is  rapidly  increasing  in 
amount  and  value  in  that  State. 

PROPERTY  DIRECTLY  TAXABLE. 

All  real  estate  not  exempt  is  subject  to  taxation  and  assessed  by  local  assessors, 
and  set  in  the  list  of  the  town  where  situated. 

Personal  property  in  this  State  or  elsewhere  not  specially  exempt  for  the  pur- 
pose of  taxation  includes  all  notes,  bonds,  and  stocks  (not  issued  by  the  United 
States) ,  moneys,  credits,  choses  in  action,  and  all  vessels,  goods,  chattels,  or  effects, 
or  any  interest  therein;  and  such  property  belonging  to  a  resident  in  the  State  is 
required  to  be  set  in  his  list  in  the  town  where  he  resides,  at  its  then  actual  valua- 
tion, except  when  otherwise  provided;  but  money  secured  by  mortgage  on  real 
estate  in  Connecticut,  when  there  is  no  agreement  that  the  borrower  shall  pay  the 
tax,  is  set  in  the  list  and  taxed  only  in  the  town  where  said  real  estate  is  situated. 

These  provisions  do  not  include  money  or  property  actually  invested  in  mer- 
chandising or  manufacturing  carried  on  outside  of  the  State,  and  the  list  of  any 
person  need  not  include  any  property  situated  in  another  State  when  it  can  be 
made  satisfactorily  to  appear  to  the  assessors  that  it  is  fully  assessed  and  taxed  in 
such  State  to  the  same  extent  as  other  like  property  owned  by  its  citizens;  but 
this  does  not  apply  to  moneys  loaned  by  residents  of  this  State  to  parties  out  of 
the  State  as  money  at  interest,  nor  to  bonds  issued  by  or  loans  made  to  any  rail- 
road company  located  out  of  the  State;  when  such  bonds  are  owned  and  loans 
made  by  residents  of  Connecticut,  they  are  subject  to  taxation  as  other  personalty 
or  may  come  within  the  tax  on  investments  hereafter  referred  to. 

It  has  been  held  by  the  supreme  courts  of  the  State  and  of  the  United  States 
that  foreign  mortgage  loans  are  taxable  under  present  laws  against  the  holder, 
notwithstanding  the  borrower  may  pay  the  taxes  on  the  mortgaged  property 
where  situated.  (Kirtland  v.  Hotchkiss,  100  U.  S.,  491.) 

Money  loaned  at  interest  with  the  agreement  that  the  borrower  shall  pay  the 
taxes  thereon,  and  secured  by  mortgage  of  real  estate  in  Connecticut,  is  exempt 
from  taxation  to  an  amount  equal  to  the  assessed  value  of  the  land  mortgaged,  as 
valued  and  set  in  the  assessment  list  of  the  town  where  it  is  situated,  but  the 
excess  of  such  loan  over  such  valuation  is  assessed  and  taxed  in  the  town  where 
the  lender  resides,  in  the  same  manner  as  other  money  at  interest.  While  real- 
estate  mortgages  are  taxable  to  the  holders  as  other  personalty,  in  practice  the 
holders  do  not  pay  any  tax,  the  borrowers  paying  all  that  is  paid. 

The  whole  property  of  every  corporation  in  this  State  whose  stock  is  not  by  law 
liable  to  taxation  and  which  is  not  required  to  pay  a  direct  tax  to  the  State  in  lieu  of 
other  taxes,  and  whose  property  is  not  by  law  expressly  exempt  from  taxation,  is 
liable  to  taxation  in  the  same  manner  as  the  property  of  individuals. 

Real  estate  owned  by  a  corporation  not  required  for  the  transaction  of  its  appro- 
priate business,  unless  specially  exempted  by  law,  is  taxable. 

The  real  estate  of  any  such  corporation  is  assessed  in  the  town  where  it  is  situ- 
ated and  the  personal  estate  where  it  has  its  principal  place  of  business,  and  the 
stockholders  of  any  corporation  the  whole  property  of  which  is  assessed  and 
taxed  in  its  name  are  exempt  from  assessment  or  taxation  for  their  stock  therein. 

Shares  of  capital  stock  of  any  bank,  national  banking  association,  trust,  insur- 
ance, investment,  turnpike,  bridge,  or  plank-road  company,  owned  by  a  resident 
of  the  State  are  set  in  his  list  at  their  market  value  in  the  town  where  he  resides,  but 
so  much  of  the  capital  of  any  such  company  as  may  be  invested  in  real  estate  on 
which  it  is  assessed  and  pays  a  tax  is  deducted  from  the  market  value  of  its  stock 
in  its  returns  to  assessors. 

The  cashiers  or  secretaries  of  all  corporations  whose  stock  is  liable  to  taxation 
are  required  annually  to  inform  the  assessors  of  each  town,  city,  or  borough  of 
the  names  of  the  stockholders  residing  therein,  the  amount  of  stock  held  by  them 
and  its  market  value,  and  a  penalty  is  imposed  for  failure  to  comply  with  this 
provision. 

The  cashier  of  each  bank,  the  treasurer  of  each  savings  bank,  and  the  secretary 
of  each  corporation  is  required  upon  request  of  assessors  of  any  town,  city,  or 
borough  to  inform  them  of  the  name  of  any  person  therein  owning  stock  or  bonds 


TAXATION    IN    CONNECTICUT.  31 

held  by  such  corporation  as  collateral  security  for  any  indebtedness  or  liability 
and  the  amount  and  description  thereof. 

The  owner  of  any  share  of  the  capital  stock  of  any  corporation  who  transfers 
such  share  to  another  with  the  intent  of  evading  the  provisions  of  the  tax  law 
forfeits  to  the  town  in  which  he  resides  1  per  cent  of  the  value  of  stock  so 
transferred. 

No  person  is  assessable  for  manufacturing  materials  or  manufactured  goods  on 
hand  beyond  the  amount  of  capital  actually  invested  and  surplus  earnings,  nor  at 
a  less  sum  than  the  present  true  value  of  his  real  estate  and  machinery  belonging 
thereto,  unless  reduced  by  indebtedness  as  provided  by  law. 

The  interest  of  any  trading,  mercantile,  manufacturing,  or  mechanical  business 
is  assessed  where  the  business  is  carried  on. 

The  average  amount  of  goods  kept  on  hand  for  sale  during  the  previous  year  is 
the  rule  of  assessment  and  taxation;  but  merchants  are  liable  to  assessment  for 
any  amount  due  them  from  responsible  persons  beyond  their  liabilities. 

A  resident  of  any  town  indebted  to  another  resident  of  the  State  in  siich  man- 
ner that  the  debt  is  liable  to  be  assessed  to  the  creditor  may  have  the  amount 
deducted  from  his  list,  and  it  is  then  added  to  the  list  of  the  creditor. 

Assessors  who  may  omit  any  real  estate  or  any  amount  equivalent  to  its  valua- 
tion from  the  list  of  any  person  because  of  indebtedness  secured  by  mortgage  on 
such  real  estate,  or  the  board  of  relief  who  may  reduce  such  list  for  such  cause, 
are  required  to  add  the  amount  of  such  indebtedness  to  the  list  of  the  creditor,  if 
resident  in  the  same  town,  and  if  he  does  not  reside  in  such  town,  to  make  a  list 
against  him  embracing  such  indebtedness,  and  notify  him  in  writing  of  the  same. 

By  special  statute  the  assessors  are  required  to  take  from  all  persons  giving  in 
tax  lists  a  rigorous  sworn  statement  in  form  prescribed,  but  the  listing  statute 
is  not  enforced.  Personal  lists  of  taxable  property  are,  in  practice,  filled  in  by 
estimate  of  assessors,  and  corrections  made  by  local  boards  of  relief  upon  appli- 
cation and  showing. 

The  following  grand  list  for  1899  shows  the  classes  of  property  assessed  locally 
for  taxation,  and  the  assessed  valuation  thereof: 

Grand  list  for  1899,  October  1. 

Valuation. 

Dwelling  houses  (with  land  up  to  li  acres) $255, 913, 932 

Land - 63,.752,308 

Mills  and  investments  in  manufacturing  operations. 105, 101, 733 

Horses                                             3,496,632 

Neat  cattle - --  3,190,281 

Sheep 20,647 

Swine  and  poultry 6, 271 

Farming  and  mechanic  utensils - 93, 126 

Clocks,  watches,  etc -  359, 729 

Musical  instruments. 914, 450 

Household  furniture  and  libraries 1, 398, 963 

Carriages,  etc - 1,879,757 

Bridges,  etc. ,  stocks -  -  - 147, 124 

Bank  insurance, etc.,  stocks.. 32,707,119 

State  stocks.. 173,232 

Railroad, city, etc., bonds .    690,320 

Stores, merchandise  and  trade 35,428,463 

Quarries,  fisheries,  and  mines 1, 103, 804 

Investments  in  vessels, etc --  1  >  182, 590 

Money  at  interest 1,508,231 

Money  on  hand .- 1,103,312 

All  other  taxable  property : 3, 821, 81 

Addition  by  board  of  relief  (township  board) 3, 854, 243 

Total..  --     517,848,086 

Deduction  b v  board  of  relief . .  9, 704, 337 


508, 143, 749 
Added  by  board  of  equalization 62, 020, 000 

State  valuation. .  570, 163, 749 


32  INDUSTRIAL    COMMISSION. 

STATE  REVENUES. 

The  principal  revenues  of  the  State  of  Connecticut  are  derived  from  the  fol- 
lowing sources: 

RAILROADS. 

With  the  exception  of  certain  real  estate  not  used  directly  in  the  operation  of 
railroads,  no  railroad  property  is  assessed  for  local  purposes,  but  all  the  property 
of  a  railroad  is  assessed  as  a  unit  for  State  purposes  only,  at  a  rate  fixed  by  law. 

This  method  is  based  on  the  assumption  that  the  market  value  of  the  stock  and 
bonds  and  floating  debt  of  a  railroad  company  represents  the  taxable  value  of  all 
its  property,  and  that  the  rate  fixed  by  law — 1  per  cent  of  such  valuation — is  prac- 
tically a  fair  average  as  regards  taxes  paid  by  other  interests,  and  what  it  would 
pay  if  assessed  proportionately  in  each  taxing  district  through  which  its  line 
passes.  It  appears  to  be  generally  regarded  in  the  State  as  a  just  system. 

Each  company  operating  in  the  State  is  required  to  deliver  to  the  controller  of 
the  State  a  verified  annual  report,  showing  the  number  of  shares  and  different 
classes  of  its  stock  and  the  market  value  of  each  share;  the  dividends  paid  on  each 
class  during  the  preceding  year;  the  amount  of  its  funded  and  floating  debt,  and 
the  market  value  of  any  such  indebtedness  which  is  below  par  in  value;  the  num- 
ber, amount,  and  market  value  of  any  unpaid  bonds  secured  by  mortgage;  the 
amount  of  bonds  issued  by  any  town  or  city  in  aid  of  the  construction  of  such 
road,  such  bonds  being  specially  exempt  by  statute;  the  amount  of  money  on 
hand;  the  amount  paid  for  taxes  during  the  previous  year;  the  whole  length  of 
the  road,  and  those  portions  thereof  lying  without  the  State. 

Every  railroad  company  is  required  to  pay  annually  on  or  before  November  25 
to  the  State  1  per  cent  of  the  valuation  of  said  stock  made  and  corrected  by  the 
State  board  of  equalization,  and  of  the  par  value  of  funded  and  floating  indebt- 
edness as  contained  in  such  statement,  or  if  any  of  such  indebtedness  is  worth  less 
than  par,  then  of  its  valuation  fixed  by  said  board  after  deducting  from  the  valu- 
ation the  amount  of  any  obligations  or  of  their  market  value,  if  below  par,  held 
in  trust  for  said  company,  as  part  of  any  sinking  fund  belonging  to  it,  and  from 
the  amount  required  to  be  paid  for  taxes  the  amount  of  taxes  paid  on  real  estate 
not  used  for  railroad  purposes;  and  the  valuation  so  fixed  by  said  board  is  declared 
by  law  to  be  the  measure  of  value  of  such  railroad,  its  rights,  franchises,  and 
property  in  the  State  for  purposes  of  taxation;  and  this  tax  is  in  lieu  of  all  other 
taxes  on  its  franchises,  funded  and  floating  debt,  and  railroad  property  in  the 
State. 

When  any  part  of  a  railroad  lies  in  Connecticut,  the  company  owning  such 
road  pays  1  per  cent  on  such  proportion  of  said  valuation  as  the  length  of  its  road 
lying  in  the  State  bears  to  the  entire  length  of  the  road. 

But  in  fixing  the  valuation  the  length  of  any  branch  thereof  in  the  State  of 
less  value  per  mile  than  one-fourth  of  the  average  value  per  mile  of  the  trunk 
road  is  excluded,  and  every  such  branch  is  estimated  at  its  just  and  true  value, 
and  assessed  at  said  rate. 

In  the  case  of  any  railroad  company,  which  during  the  2  years  preceding  the 
making  -of  the  annual  return  has  paid  regular  dividends  at  the  same  annual  rate 
per  cent  on  all  or  any  class  of  its  shares  of  stock,  the  market  value  of  each  share 
of  said  stock  is  by  law  declared  to  be  the  average  of  the  closing  bids  or  prices 
offered  for  said  stock  or  any  shares  thereof,  during  the  12  consecutive  months 
preceding  the  making  of  such  returns,  as  regularly  published  by  any  board  of 
directors,  unless  the  State  board  considers  it  desirable  that  the  market  value  thereof 
shall  be  otherwise  ascertained. 

In  all  cases  where,  for  any  reason,  it  is  not  possible  or  feasible  to  fix  the  market 
value  of  any  stock  in  the  manner  described,  the  value  in  the  return  is  fixed  at  the 
price  of  the  last  reported  market  sale  of  such  stock,  and  the  board  may  fix  and 
determine  the  valuation  according  to  the  best  information  they  can  obtain. 

From  the  judgment  and  determination  of  the  State  board  of  equalization  as  to 
valuation  there  is  no  appeal  except  through  the  courts. 

The  amount  of  taxes  paid  by  railroads  in  this  State  in  1899  was  $965,502.92. 
Individuals  are  not  taxed  either  on  the  stock  or  the  securities  of  railroad  compa- 
nies in  the  State  held- by  them. 

STREET   RAILWAYS. 

The  foregoing  methods  and  laws  with  regard  to  the  taxation  of  railroads  apply 
also  to  and  include  all  street  railways  of  every  description.  The  amount  paid  by 
street  railways  in  1899  was  $138,502.78. 


CONNECTICUT    CORPORATION    TAXES.  33 

TAX  ON  NONRESIDENT  STOCK. 

The  cashier  or  secretary  of  each  corporation  whose  stock  is  liable  to  taxation, 
and  not  otherwise  taxed  under  the  provisions  of  the  laws  for  the  taxation  of  cor- 
porations, is  required  to  deliver  annually  to  the  State  controller  a  sworn  list  of 
its  stockholders  residing  without  the  State,  and  the  number  and  market  value  of 
the  shares  of  stock  therein  belonging  to  each,  and  to  pay  to  the  State  H  per  cent 
of  such  value,  under  penalty  of  forfeiture  of  $100  in  addition  to  said  l|  per  cent 
for  neglect  to  comply  with  these  provisions.  The  yield  from  this  tax,  mostly 
from  banks,  trust  companies,  and  insurance  companies,  in  1899  was  $167,537.27. 

DOMESTIC  INSURANCE  COMPANIES. 

The  secretary  or  treasurer  of  every  mutual  fire  or  life  insurance  company 
chartered  by  the  State  is  required  annually  to  render  to  the  controller  a  sworn 
statement  showing  the  total  amount  of  its  assets  and  market  value  thereof,  the 
amount  of  premium  notes  held  by  it,  with  certain  deductions  for  unpaid  losses, 
and  real  estate  liable  to  taxation  in  this  State  and  other  exempt  property;  and  every 
such  mutual  fire-insurance  company  is  required  to  pay  as  a  tax  upon  its  corporate 
franchise  three-fourths  of  1  per  cent  of  such  valuation  remaining,  and  every 
such  mutual  life-insurance  company  is  required  to  pay  to  the  State  annually  as  a 
tax  upon  its  corporate  franchise  a  sum  equal  to  one-fourth  of  1  per  cent  on  the 
total  amount  of  its  premium  notes,  and  on  the  market  value  of  all  its  other 
assets,  deducting  its  unpaid  losses  and  the  market  value  of  its  real  estate  taxed 
locally,  and  other  property  that  may  be  exempt  from  taxation. 

These  sums  so  required  to  be  paid  by  fire  and  life  insurance  companies  annually 
are  in  lieu  of  all  other  taxes  upon  their  assets,  except  upon  real  estate  held  over 
and  above  what  may  be  necessarily  used  in  transacting  their  appropriate  business, 
and  in  case  of  a  life-insurance  company  except  its  taxable  stock. 

The  yield  of  these  taxes  in  1899  wasf 

Tax  on  mutual  fire-insurance  companies. _ $11, 036. 38 

Tax  on  mutual  life-insurance  companies 283, 817. 12 


Total 294,853.50 

FOREIGN  INSURANCE  COMPANIES. 

Every  insurance  company  organized  under  the  laws  of  another  State,  and  doing 
business  in  Connecticut,  and  each  agent  of  every  such  insurance  company,  is 
required  to  pay  to  the  insurance  commissioner  of  this  State  reciprocal  taxes,  or 
the  same  fees  and  taxes  as  are  imposed  by  such  other  State  upon  any  similar  Con- 
necticut insurance  company  transacting  business  in  such  other  State,  and  every 
agent  of  any  insurance  company  organized  under  the  laws  of  any  foreign  govern- 
ment, licensed  to  do  business  in  Connecticut,  is  required  to  pay  to  the  insurance 
commissioner  an  annual  tax  of  2  per  cent  upon  the  amount  of  premiums  collected 
or  received  during  the  year.  The  receipts  of  the  insurance  commissioner  for  1899 
were  $77,946.98. 

SAVINGS  BANKS. 

The  treasurer  of  each  savings  bank  is  required  annually  to  make  to  the  State 
controller  a  sworn  statement  of  all  its  deposits,  exclusive  of  surplus,  and  each 
bank  to  pay  to  the  State  an  annual  tax  on  its  corporate  franchise  equal  to  one- 
fourth  of  1  per  cent  on  the  amount  of  its  deposits,  exclusive  of  surplus,  deducting, 
however,  from  said  deposits  the  sum  of  $50.000  and  certain  classes  of  bonds  exempt, 
said  tax  being  in  lieu  of  all  other  taxes  upon  such  bank,  its  deposits  and  surplus, 
except  upon  real  estate  owned  by  it  not  required  and  used  in  its  appropriate  busi- 
ness. The  amount  of  this  tax  in  1899  was  $392,782.98. 

NATIONAL  BANKS. 

The  cashier  of  each  National  bank  in  the  State  is  annually  required  to  give  to 
the  treasurer  of  the  town  where  such  bank  is  located  a  sworn  list  of  all  its  stock- 
holders residing  outside  of  the  State,  and  the  number  of  shares  belonging  to  each 
and  the  market  value  thereof,  and  to  pay  to  the  treasurer  a  tax  of  H  per  cent  of 
such  value;  and  upon  failure  to  comply  with  this  provision  forfeits  to  such  town 
$100,  together  with  such  1£  per  cent  required  to  be  paid. 


34  INDUSTRIAL    COMMISSION. 

TELEGRAPH  AND  TELEPHONE  COMPANIES. 

A  tax  is  imposed  upon  telegraph  companies  of  25  cents  per  mile  of  wire,  and  on 
telephone  compcinies  of  70  cents  for  each  transmitter,  based  upon  sworn  reports. 
The  amount  of  this  tax  in  1899  was  $14,026.65. 

EXPRESS  COMPANIES. 

Every  express  company  doing  an  express  business  in  Connecticut  is  required  to 
deliver  to  the  State  controller  annually  a  sworn  statement  of  the  gross  amount 
of  express  charges  paid  at  each  of  its  offices  in  the  State  during  the  preceding 
year,  and  pay  to  the  State  5  per  cent  of  the  gross  amount  of  all  express  charges 
paid  to  it  in  the  State  during  the  preceding  year,  which  sum  is  in  lieu  of  all  other 
taxes  upon  the  estate  of  such  company  used  exclusively  in  the  express  business; 
but  when  any  such  express  company  fails  to  make  such  return  the  treasurer  may 
accept  $100  in  lieu  of  the  sum  then  due. 

The  amount  of  such  tax  in  1899,  paid  by  the  Adams  and  American  express 
companies,  was  $9,958.36. 

CHARTER  FEES  ON  CAPITAL  STOCK. 

The  law  provides  for  charter  fees  on  capital  stock  of  new  corporations  organized 
under  the  general  law,  at  50  cents  per  $1,000,  but  on  corporations  organized  to  do 
business  exclusively  within  the  State,  10  cents  per  $1,000.  There  is  a  tax  of  $1  per 
$1,000,  or  not  less  than  $50  for  any  one  company,  for  special  charters  for  incorpo- 
ration. 

The  amount  of  this  tax  in  1899  was  $28,846. 

INVESTMENT  TAX. 

A  special  tax  is  imposed  upon  investment  companies  and  investment  brokers 
at  1  per  cent  on  the  aggregate  amount  of  all  choses  in  action  secured  by  mort- 
gages on  real  estate  in  any  other  State  or  Territory.  Such  company  or  broker  is 
required  to  secure  from  the  State  treasurer  a  certificate  of  authority  to  act  in 
such  capacity  and  to  make  annual  reports  of  the  amounts  of  such  securities  sold 
during  the  preceding  year,  and  pay  to  the  State  a  sum  equal  to  1  per  cent  on  the 
aggregate  of  all  such  securities. 

This  is  regarded  rather  in  the  nature  of  a  penalty  for  nonpayment  of  the  4-mill 
tax  in  the  following  statutory  provision,  most  of  such  foreign  securities  paying 
such  4-mill  tax  before  negotiation. 

It  is  specially  provided  that  any  person  may  take  or  send  to  the  State  treasurer 
any  bond,  note,  or  other  chose  in  action,  or  description  of  the  same,  and  may  pay 
to  the  State  a  tax  of  2  per  cent  (formerly  1  per  cent)  on  the  face  amount  thereof 
for  5  years,  or  at  the  option  of  such  person  for  a  greater  or  less  number  of  years 
at  the  same  rate,  and  the  treasurer  thereupon  certifies  that  the  same  is  exempt 
for  such  period,  and  all  bonds,  notes,  and  other  choses  in  action  so  certified  are 
exempt  from  all  taxation  in  the  State  during  the  period  for  which  said  tax  is  paid. 

The  law  for  such  investment  tax  was  enacted  in  1890,  and  the  taxes  paid  under 
it  are  shown  by  the  following  table: 


Fiscal  year  ending— 

Rates. 

Number 
of  notes, 
etc. 

Amount  of 
notes,  etc. 

Tax. 

1890  

Mills. 
2 

44  501 

§33  654  335  00 

$129  452  Oft 

1891  .... 

2 

30  061 

24  792  509  04 

80  524  47 

1892  

2 

44  635 

39  473  988  78 

108  433  95 

1893  . 

2 

16  863 

12  418  673  91 

33  991  48- 

1894  

2 

25  583 

20  507  396  21 

56  003  88 

1895  

2 

23  719 

16  533  543  90 

56  861  83- 

1896  . 

2 

24'  338 

21  159  161  35 

48'  576*  77 

1897  

r   2 

14,  496 

14,  580,  981.  57 

44,  543.  84 

1898. 

I    4 
4 

7,974 
21  910 

7,  435,  807.  02 
20  637  643  59 

32,  194.  53 
87  177  19 

1899  

4 

23'  036 

21  597  311  43 

92  425  12 

This  4-mill  annual  tax  applies  to  bonds  and  notes  held  in  the  State  not  other- 
,wise  taxed,  and  is  quite  generally  taken  advantage  of  by  the  holders. 


TAXATION    IN    CONNECTICUT.  35 

It  will  be  observed  that  the  largest  amounts  of  such  securities  returned  and 
taxes  paid  were  in  the  first  years  of  the  law,  1890  to  1893. 

The  foregoing  special  taxes,  with  some  other  minor  receipts,  constitute  all  the 
sources  of  revenue  for  State  purposes,  and  the  total  revenues  therefrom  in  recent 
years  have  exceeded  the  State  expenditures  for  current  purposes,  leaving  a  con- 
siderable amount  for  the  payment  of  the  State  debt. 

The  State  tax  commissioners,  in  their  report  made  in  1887,  at  a  time  when  a  por- 
tion of  the  State  revenues  was  raised  by  direct  tax  on  property  in  the  several 
local  taxing  districts,  stated  that  they  did  not  believe  it  would  be  either  practi- 
cable or  desirable  to  dispense  with  the  direct  State  tax.  They  gave  as  a  reason  for 
such  belief  that  the  weight  of  this  tax  came  home  to  every  taxpayer,  in  an 
increase  of  his  town  rate,  which  he  could  not  fail  to  feel,  and  made  the  whole 
community  watchful  of  any  unnecessary  appropriation  from  the  public  treasury; 
and  if  all  the  revenue  of  the  State  were  derived  from  corporations  or  other 
sources  riot  directly  affecting  the  individual  taxpayer,  it  would  be  apt  to  be 
expended  with  less  thought  and  care. 

For  some  years  last  past  all  the  revenues  of  the  State  have  been  derived  from 
corporations  and  other  sources  not  directly  affecting  the  individual  taxpayer, 
with  the  effect  as  to  amount  of  revenues  already  stated.  We  were  informed  by  a 
State  official  in  conversation  that  the  State  taxes  so  raised  were  expended  liber- 
ally and  without  strict  regard  for  economy,  and  the  separation  of  State  taxe-» 
from  local  was  apparently  conducive  to  liberality  in  public  expenditures. 

MILITARY  COMMUTATION  TAX. 

An  annual  tax  of  $2  in  commutation  of  military  duty  is  imposed  upon  every 
male  citizen  between  the  ages  of  18  and  45  not  exempt  therefrom  by  law.  which 
is  paid  in  the  manner  provided  for  town  taxes,  and  remitted  to  the  State  treas- 
urer for  the  use  of  the  State.  While  special  laws  have  been  enacted  looking  to 
the  enforcement  of  this  tax,  it  does  not  appear  to  be  generally  enforced  and  col- 
lected, especially  in  the  cities. 

In  1899  8150,598.84  was  paid  by  83,644  persons. 

INHERITANCE  TAX. 

An  inheritance  tax,  so  called,  is  imposed  upon  all  estates  of  deceased  persons  in 
excess  of  $10,000.  Where  the  estate  passes  to  direct  heirs  the  tax  is  $5  on  each  $1 ,000 
of  the  excess  above  §10,000,  and  where  it  passes  to  collateral  heirs  the  rate  is  $30 
on  each  §1,000  of  such  excess. 

The  amount  of  this  tax  in  1899  was  $115,195.30. 


NEW  YORK. 

The  controller  of  New  York,  in  his  report  for  1898,  commenting  upon  "the 
confused,  illogical,  and  conflicting"  condition  of  the  taxation  laws  of  the  State, 
says:  "Investigation  shows  that  they  have  been  largely  adopted,  from  time  to 
time,  simply  to  meet  the  increasing  expenditures  of  the  State,  with  little  regard 
to  economic  or  any  just  and  equitable  principle.  They  were  framed  rather  in 
accord  with  the  witty  Frenchman's  definition  of  taxation,  '  the  plucking  of  the 
goose  in  such  manner  as  to  get  the  most  feathers  with  the  least  squawking.'  In 
a  word,  it  must  be  confessed  that  nearly  all  our  tax  laws  are  legislative  make- 
shifts and  many  of  them  blunders." 

It  may  be  said,  however,  that  the  officers  of  the  State  who  have  to  do  with  the 
system  of  taxation,  from  the  governor  down,  have  of  late  years  kept  up  such 
persistent  "  squawking"  over  the  inefficiency  and  inequality  of  the  present  sys 
tern  of  taxation  that  public  thought  is  fully  aroused  upon  the  subject  of  revision 
and  reform  of  the  taxation  laws,  and  in  obedience  to  the  public  will  important 
legislation  in  that  direction  has  already  resulted,  and  the  subject  is  now  a  live 
issue  in  that  State. 

GENERAL  PROPERTY  TAX. 

The  system  of  a  uniform  tax  upon  the  assessed  valuation  of  all  kinds  of  prop- 
erty prevails.  The  methods  of  assessment  employed  are  conducive  to  defective 
assessment  and  valuation,  especially  in  respect  to  personal  property.  The  assess- 
ment of  real  and  personal  property,  including  corporate  property  not  specially 
exempt,  is  made  by  local,  township,  or  ward  assessors  for  State,  county,  and  local 
purposes,  and  in  a  measure  "the  lower  the  assessment,  the  lower  the  tax."  This 
method  creates  a  rivalry  among  local  assessing  officers  for  advantage  to  their 
respective  districts  by  low  assessments  of  property,  resulting  in  gross  inequalities 
and  discriminations.  There  are  also  elements  of  personal  advantage  to  assessors 
and  political  influences  contributing  to  unfair  and  unjust  assessments. 

The  amount  of  State  tax  required  from  property  assessment,  based  on  previous 
valuation  of  real  and  personal  property,  is  fixed  by  annual  bills  in  the  legislature 
and  apportioned  among  counties  according  to  their  assessed  valuation,  the  county 
taxes  apportioned  among  the  townships  and  smaller  taxing  districts,  so  that  all 
taxes,  State,  county,  and  local,  with  the  exceptions  referred  to,  are  raised  upon 
the  basis  of  local  assessments  paid  to  local  collectors,  who  retain  the  local  tax  and 
remit  the  county  and  State  taxes  to  the  county  treasurer,  who  in  turn  remits  the 
State  tax  to  the  State  treasury.  About  one-half  of  the  State  revenues  is  thus 
raised  by  local  assessment  and  the  other  half  by  special  methods  hereafter 
referred  to. 

The  board  of  supervisors  is  charged  with  the  equalization  of  assessments  and 
valuations  of  the  several  districts  in  the  county.  The  entire  assessment  system 
is  under  the  supervision  of  a  State  board  of  tax  commissioners,  two  or  more  of 
whom  are  by  law  required  to  officially  visit  every  county  in  the  State  at  least  once 
in  2  years  and  inquire  into  the  methods  of  assessment  and  taxation,  and  see 
whether  the  assessors  faithfully  discharge  their  duties.  In  addition  to  this,  there 
is  a  State  board  of  equalization  composed  of  the  State  tax  commissioners  and  com- 
missioner of  the  land  office,  who  meet  each  year  for  the  purpose  of  examining  and 
revising  the  valuations  of  real  and  personal  property  of  the  several  counties  in 
the  State.  The  rate  of  taxation  is  governed  in  each  taxing  district  by  the  require- 
ments for  State,  county,  and  local  purposes. 

REAL  ESTATE. 

For  our  purpose,  little  need  be  said  as  to  the  taxation  of  real  estate  generally. 
The  law  provides  that  all  real  estate  not  expressly  exempt  shall  be  assessed  and 
taxed  by  local  assessors  where  located  at  its  full  cash  value. 

Practically  all  real  estate  not  exempt  is  assessed,  but  by  no  means  at  full  or 
uniform  value.  Although  the  law  requiring  assessment  of  real  estate  at  its  full 
36 


TAXATION    IN    NEW  YORK.  37 

market  value  applies  to  all  counties  alike,  yet  the  report  of  State  tax  commission- 
ers for  1898  shows  that  in  their  judgment  real  estate  was  assessed  at  varying  pro- 
portions of  its  full  value  in  the  several  counties,  ranging  from  50  per  cent  in  one 
county  to  90  per  cent  in  another.  The  60  counties  of  the  State  had  25  different 
percentages  of  full  value  at  which  real  estate  was  assessed.  There  is  a  like  dis- 
parity among  the  towns  of  the  same  county. 

The  assessed  valuation  of  real  estate  in  1899  was  $4,413,848,496,  or  about  7 
times  the  valuation  of  the  personal  property  of  the  State.  This  significant  dis- 
crepancy is  further  emphasized  when  followed  through  the  collection  of  taxes  for 
State,  county,  and  town  purposes.  The  latest  returns  for  that  purpose  at  hand 
are  those  of  1897.  For  that  year  the  total  amount  of  taxes  for  the  purposes 
named  was  $80,865,704.  Of  this  amount,  real  estate  paid  $72,358,268  and  personalty 
$8,507,436,  or  a  little  more  than  one-tenth  of  the  total.  These  figures  are  taken 
from  the  report  of  the  controller  for  1900,  who  says  that,  after  giving  careful 
attention  to  the  condition  of  real  property  in  this  respect,  he  is  satisfied  that 
"  unless  relief  of  some  kind  is  afforded,  real  estate  in  a  short  time  will  not  be 
worth  the  owning  for  investment  purposes."  He  says  further,  in  the  same  report, 
that  "under  the  present  statutes  real  estate  has  to  bear  nearly  the  entire  burden 
of  tax,  while  personal  property,  which  is  so  much  better  able  to  contribute,  pays 
very  little  at  the  best,  while  vast  amounts  escape  tax  altogether." 

Encumbered  real  estate  is  assessed  to  the  owner  at  full  value,  without  deduc- 
tion for  mortgages,  the  mortgages  being  assessable  to  the  holders  by  local  assessors 
at  local  tax  rates. 

PERSONAL  PROPERTY. 

While  the  reports  of  State  officials  emphasize  the  inefficiency  of  the  present  tax 
laws  of  New  York  in  regard  to  real  estate,  still  greater  disparity  and  injustice  is 
shown  in  the  taxation  of  personal  property  under  the  prevailing  system.  It 
appears  that  such  property  is  in  small  part  only  assessed,  and  that  very  unequally 
and  capriciously.  In  this  connection  it  may  be  stated  that  New  York  is  an 
exceedingly  wealthy  State,  especially  in  the  manifold  forms  of  personal  property. 

The  report  of  State  tax  commissioners  for  1900  contains  a  table  showing  the 
percentage  of  State  tax  paid  by  real  and  personal  property  in  each  year  from 
1867  to  1899,  inclusive.  In  1867  the  percentage  paid  by  personal  property  was 
25.30;  it  was  reduced  to  9.94;in  1884,  and  varied  somewhat  to  1898,  when  it  reached 
11.20;  in  1899  it  was  13.05,  there  being  a  considerable  increase  in  tne  assessment 
valuation  over  previous  years.  A  schedule  of  assessed  valuations  of  real  estate 
and  personal  property  in  the  same  report  shows  that  in  1867  the  valuation  of  real 
estate  was  $1,327,403,886  and  of  personal  property  $438,685,254.  In  1890  the 
valuation  of  real  estate  had  gradually  increased  to  $3,397,234,679,  while  that  of 
personalty  had  decreased  to  $382,159,067,  having  in  some  previous  years  been  con- 
siderably lower.  From  1890  a  steady  increase  in  valuation  in  both  real  and  per- 
sonal property  is  shown,  and  in  1899  that  of  real  property  was  $4,813,779,260  and 
personalty  $748,424,938. 

In  1897  an  investigation  by  the  grand  jury  of  Westchester  County  disclosed  the 
fact  that  in  that  wealthy  county  bordering  on  New  York  the  ratio  of  taxable 
valuation  of  personal  to  real  propertj7"  in  five  towns  was  only  1  per  cent,  and  in 
four  other  towns  the  ratio  was  less  than  2  per  cent.  In  another  town  in  which 
the  assessor  tried  to  enforce  the  law  the  rabio  of  personal  to  real  was  37  per  cent; 
but  for  the  whole  county  it  was  only  3.3  per  cent.  In  the  neighboring  county  of 
Richmond,  in  New  York  Harbor,  the  rate  was  only  six-tenths  of  1  per  cent':  in 
Kings  County,  containing  the  city  of  Brooklyn,  the  ratio  was  only  4£  per  cent; 
in  Monroe  County,  including  the  city  of  Rochester,  it  was  5.6  per  cent;  in  Erie 
County,  including  the  city  of  Buffalo,  it  was  6.4  per  cent,  and  in  the  county  of 
Onondaga,  including  the  city  of  Syracuse,  it  was  6.7  per  cent;  while  in  the  almost 
exclusively  agricultural  counties  of  Genesee  and  Jefferson  it  was  13  per  cent;  in 
Livingston,  14  per  cent;  in  Washington  and  Warren  counties,  nearly  20  per  cent, 
and  in  New  York  County,  22^  per  cent;  the  ratio  in  the  whole  State  being  12.6 
per  cent. 

The  controller  in  his  report  for  1898  gives  another  striking  illustration  of  the 
escape  of  personalty  from  taxation,  found  in  the  figures  of  107  estates  taken  indis- 
criminately from  the  inheritance-tax  rolls  from  several  of  the  large  and  populous 
counties,  the  tax  actually  having  been  paid,  so  that  the  figures  are  accurate  and 
reliable.  The  assessed  taxable  value  of  these  estates  was  $3,471,413,  while  the 
appraised  value  at  the  death  of  decedents  was  $215,891,568,  the  former  being  only 
1.6  per  cent  of  the  latter. 

This  interesting  and  instructive  examination  showed  not  only  gross  evasion  of 
taxation,  but  ridiculous  discrimination  in  the  assessment  of  even  the  1.6  per  cent; 


38  INDUSTRIAL    COMMISSION. 

for  while  34  per  cent,  or  one-third,  of  the  estates  absolutely  escaped  taxation,  in 
the  estates  which  did  pay  the  tax  varied  from  two-tenths  of  1  per  cent  to  nearly 
19  per  cent.  In  his  report  for  1899  the  comptroller  says  that,  excepting  the  stock 
of  banks  and  trust  companies  assessed  under  a  special  law,  and  which  can  not 
escape  taxation,  the  assessed  valuation  of  personalty  in  New  York  State  has  not 
increased  during  the  last  40  years,  and  that  from  study  and  observation  he  is  con- 
vinced that  not  more  than  3  per  cent  of  the  personal  property  in  the  State  is 
assessed;  and  that  the  personalty  of  the  State  amounts  to  $18,000,000.000.  or  nearly 
four  times  the  assessed  valuation  of  real  estate.  In  this  and  other  reports  he 
expresses  a  positive  opinion  that  the  attempt  to  reach  personal  property,  in  a 
general  property  tax,  should  be  abandoned,  as  it  has  been  in  "practically  every 
civilized  community  in  the  world  except  the  United  States." 

The  joint  committee  on  taxation  in  the  last  legislature  in  its  report  accepts  the 
above  estimate  of  the  comptroller  as  substantially  correct,  and  says  that  this  con- 
dition of  tax  affairs  in  the  State  has  long  been  a  subject  of  complaint  and  a 
prominent  feature  of  the  reports  of  special  committees  and  commissions  on  tax- 
ation without  exception,  and  has  received  serious  comment  in  the  annual  mes- 
sages of  all  governors  for  more  than  a  quarter  of  a  century. 

C.  C.  Plehn,  in  his  work  on  Public  Finance,  says  that  in  N^v  York  personal 
property  is  assessed  at  a  trifle  over  11  per  cent  of  the  real  estate,  and  about  10  per 
cent  of  all  property;  that  according  to  the  census  valuation  of  1890  there  was  in 
New  York  $5,817,704,667  worth  of  real  property  and  $2,758,997,324  worth  of  per- 
sonalty. Real  estate  was  assessed  at  $3,403,751,246,  or  about  58  per  cent  of  its 
census  value,  while  personal  property  was  assessed  at  $382,159,067,  or  not  quite 
14  per  cent  of  its  census  value.  ' '  When,"  he  says,  "  it  is  remembered  that  the  census 
report  omits  some  unascertainable  items  of  personal  property,  it  is  fair  to  say 
that  90  per  cent  of  the  personal  property  in  New  York  is  untaxed,  where,  at  the 
same  time,  only  42  per  cent  of  real  estate  is  untaxed/' 

It  is  said  that  in  two  adjoining  counties  a  few  years  ago  there  was  a  difference 
of  $24,000  per  mile  in  the  assessment  of  the  same  railroad,  illustrating  the  inequal- 
ity resulting  through  the  competitive  valuation  occurring  from  the  levying  of 
State  and  county  taxes  upon  the  basis  of  township  assessment. 

This  unsatisfactory  condition  of  the  taxation  laws  and  the  manner  of  their 
enforcement  has  received  special  attention  from  State  officials  and  the  public  gen- 
erally during  the  past  few  years,  resulting  in  some  advantageous  legislation  in 
the  substitution  of  a  board  of  tax  commissioners  for  the  State  board  of  assessors, 
with  enlarged  powers  for  the  enforcement  of  more  equitable  valuation  and  assess- 
ment of  property,  in  advancement  in  values,  and  in  the  addition  of  new  proper- 
ties to  tax  lists  by  local  assessors,  as  shown  in  the  increased  valuation  of  both  real 
and  personal  property  during  the  past  few  years,  which  has  excited  considerable 
criticism  and  opposition. 

The  increase  for  the  years  1896, 1897.  and  1898  in  real  estate  assessments  aggre- 
gated $503,430,033,  and  in  personal  assessments,  $216,970,118. 

For  the  purpose  of  securing  more  equitable  taxation  of  property,  material 
amendments  have  been  made  to  corporation  and  transfer  tax  laws,  which  will  be 
referred  to  under  those  subjects. 

Personal  property,  in  general,  is  assessed  locally  for  State,  county,  and  local 
taxes,  and  that  class  of  property  alone  is  subject  to  deduction  of  just  debts  of 
owners.  All  real  estate  mortgages  are  included  in  the  indebtedness  of  taxables, 
subject  to  deduction  from  the  valuation  of  their  personalty,  a  privilege  resulting 
in  gross  abuses  and  escape  of  much  property  from  taxation. 

A  public  official  stated  to  the  writer  in  a  general  way  that  one  year  personal  prop- 
erty in  the  city  of  New  York  was  assessed  at  about  $1,400,000,000,  and  deductions 
for  indebtedness  amounted  to  about  $1,000,000,000. 

The  personal  property  of  corporations,  associations  or  partnerships,  taxable 
under  the  law  for  the  taxation  of  franchises,  capital  stocks  or  dividends,  is  exempt 
from  taxation  for  State  purposes,  if  the  special  taxes  referred  to  have  been  paid, 
and  so  with  the  personal  property  of  a  private  or  individual  banker  taxed  under 
special  law. 

The  capital  of  nonresidents  of  the  State,  invested  in  business  within  the  State, 
is  taxable  as  personal  property  where  the  business  is  carried  on  to  the  same  extent 
as  if  they  were  residents. 

Debts  owing  to  nonresidents  of  the  United  States  are  assessed  as  other  per- 
sonal property  in  the  State,  every  agent  of  such  nonresident  creditor  being 
required  to  make  annual  statement  of  such  taxable  property  in  any  county  where 
it  may  be  for  the  purpose  of  local  assessment  and  taxation. 

The  owner  or  holder  of  stock  in  an  incorporated  company,  liable  to  taxation  on 
its  capital,  is  not  taxed  as  an  individual  for  such  stock. 


TAXATION    IN    NEW  YORK.  39 

There  are  no  special  provisions  for  the  listing  of  personalty  for  taxation, 
and  the  assessment  is  made  largely  by  estimate  of  local  assessors.  There  appears 
to  be  strong  opposition  to  the  adoption  of  a  listing  system;  the  conclusions  of  the 
joint  committee  on  taxation  of  1899  as  to  that  method  for  increasing  assessments 
of  personal  property,  will  be  referred  to  in  the  consideration  of  its  report. 

The  terms  real  estate  and  personal  estate  are,  for  purposes  of  taxation,  com- 
prehensively denned  in  the  law  of  New  York  as  recently  amended.  Real  estate 
includes  the  land  itself,  above  and  under  water,  all  buildings  and  other  articles 
and  structures  erected  upon,  under  or  above  or  affixed  to  the  same;  all  wharfs 
and  piers,  including  the  value  of  the  right  to  collect  wharfage,  cranage,  and  dock- 
age thereon;  all  bridges,  all  telegraph  lines,  wires,  poles,  and  appurtenances;  all 
supports  and  inclosures  for  electrical  conductors  and  other  appurtenances  upon, 
above,  and  under  ground;  all  surface,  underground  or  elevated  railroads,  includ- 
ing the  value  of  all  franchises,  rights,  or  permission  to  construct,  maintain,  or 
operate  the  same  in,  under,  above,  on,  or  through  streets,  highways,  or  public 
places;  all  railroad  structures,  substructures,  and  superstructures,  tracks,  and 
the  iron  thereon;  branches,  switches,  and  other  fixtures  permitted  or  authorized 
to  be  made,  laid,  or  placed  in,  upon,  above,  or  under  any  public  or  private  road, 
street,  or  ground;  all  mains,  pipes,  and  tanks  laid  or  placed  in,  upon,  above,  or 
under  any  public  or  private  street  or  place  for  conducting  steam,  heat,  water,  oil, 
electricity,  or  any  property,  substance;  or  product  capable  of  transportation  or 
conveyance  therein  or  that  is  protected  thereby,  including  the  value  of  all  fran- 
chises, rights,  authority,  or  permission  to  construct,  maintain,  or  operate,  in,  under, 
above,  upon,  or  through  any  streets,  highways,  or  public  places,  any  mains,  pipes, 
tanks,  conduits,  or  wires  with  their  appurtenances  for  conducting  water,  steam, 
heat,  power,  gas,  oil,  or  other  substance,  or  electricity  for  telegraphic,  telephonic, 
or  other  purposes;  all  trees  and  underwood  growing  upon  land,  and  all  mines, 
minerals,  quarries,  and  fossils  in  and  under  the  same,  except  mines  belonging  to 
the  State. 

A  franchise  or  right  is  designated  as  a  "  special  franchise,"  and  is  deemed  to 
include  the  value  of  the  tangible  property  of  a  person,  copartnership,  association, 
or  corporation  situated  in,  upon,  under  or  above  any  street,  highway,  public  place 
or  public  waters,  in  connection  with  the  special  franchise,  and  such  tangible 
property  is  taxed  as  a  part  of  the  special  franchise. 

The  term  "  personal  property  "  includes  chattels,  money,  things  in  action,  debts 
due  from  solvent  debtors,  whether  on  account,  contract,  note,  bond,  or  mortgage; 
debts  and  obligations  for  the  payment  of  money  due  or  owing  to  persons  residing 
within  this  State,  however  secured  or  wherever  such  securities  shall  be  held;  debts 
due  by  inhabitants  of  this  State  to  persons  not  residing  within  the  United  States 
for  the  purchase  of  any  real  estate,  public  stocks,  stocks  in  moneyed  corporations, 
and  such  portion  of  the  capital  of  incorporated  companies  liable  to  taxation  on 
their  capital  as  shall  not  be  invested  in  real  estate. 

MORTGAGES. 

This  species  of  property,  except  when  held  by  savings  banks,  life  insurance  com- 
panies, building  and  loan  associations,  and  nonresidents,  is  subject  to  assessment 
at  full  value  in  the  local  tax  district  where  the  holders  reside,  at  the  local  tax  rate 
in  each  locality.  This  local  rate  varies,  but  will  average  at  least  2  per  cent. 

As  a  matter  of  fact,  however,  this  class  of  property,  while  legally  taxable,  yields 
very  little  revenue,  and  usually  succeeds  in  avoiding  the  tax  rolls.  When  the 
local  assessors  do  happen  to  find  it  and  place  it  upon  the  roll,  it  is  usually  in  the 
case  of  trustee,  guardian,  executor,  or  the  abnormally  conscientious  citizen  of  the 
State,  in  which  case  the  local  tax  rate  upon  a  high  valuation  operates  with  undue 
severity,  and  subjects  the  mortgage  property  to  many  times  the  tax  actually  paid 
by  personal  property  in  general.  It  subjects  those  who  are  taxed  upon  such 
security  to  the  gross  injustice  of  a  tax  equal  to  one-half  the  income  thereon,  while 
the  great  mass  of  mortgages  escape  entirely. 

The  joint  legislative  committee  on  taxation,  after  careful  investigation,  reported 
the  estimated  value  of  the  mortgage  indebtedness  of  the  State  to  be  $2.000,000,000. 
The  assessed  valuation  of  all  personal  property  in  the  State  was  only  $748,424,938. 

The  committee,  in  view  of  these  facts,  and  taking  into  consideration  the  revenue 
needs  of  the  State,  the  effect  upon  the  rate  of  interest,  and  the  condition  of  bor- 
rowers of  the  State,  recommended  in  lieu  of  other  taxes  a  State  tax  of  5  mills  on 
the  dollar  upon  indebtedness  secured  by  mortgage  upon  corporate  and  individual 
real  property,  estimating  the  State  revenue  that  would  be  derived  therefrom  at 
$10,000,000,  being  the  amount  of  State  taxes  now  raised  by  direct  levy  upon  real 
estate.  After  careful  investigation,  the  committee  concluded  that  although  mort- 


40  INDUSTRIAL    COMMISSION. 

gages  generally  escape  taxation,  under  the  existing  system,  the  liability  to  tax 
affects  the  interest  rate  to  the  extent  of  one-half  of  1  per  cent  now,  so  that  the 
exemption  of  mortgages  from  all  taxation,  except  to  the  extent  of  a  State  tax  of 
one-half  of  1  per  cent,  would  produce  no  substantial  change  in  the  average  rate  of 
interest  in  the  State. 

The  committee  contended  that  the  tax  would  not  be  subject  to  the  common 
objection  of  double  taxation,  "a  phrase  which  is  itself  brimful  of  duplicity  and 
highly  convenient  for  sophistical  reasoners,"  for  the  reason  that  the  mortgage 
would  be  subject  only  to  a  State  tax,  while  the  land  would  be  subject  to  local 
taxation  alone  under  the  plan  to  raise  all  the  State  revenue  otherwise  than  by 
direct  levy  upon  assessed  valuations  of  real  and  personal  property. 

In  the  taxation  of  mortgages  under  the  proposed  plan,  recourse  would  be  had 
by  the  State  to  mortgage  records,  therefore  none  would  escape,  and  opportunity 
for  tax  dodging  would  be  removed.  There  would  be  no  deduction  for  debts  and 
no  exemptions,  and  the  revenue  from  that  source  would  be  steady  and  reliable. 

TAXATION  OF  CORPORATIONS. 

While  the  general  property  tax  is  the  main  part  of  the  system  ftf  New  York  for 
even  State  purposes,  it  is  supplemented  by  certain  other  methods  for  reaching 
corporate  property.  The  existing  corporation  tax  law  in  its  entirety  is  one  of 
the  most  complicated  and  clumsy  statutes  on  the  books. 

In  general,  the  real  estate  of  all  incorporated  companies  liable  to  taxation, 
including  that  of  quasi-public  corporations,  is  required  to  be  assessed  in  the  tax 
district  where  it  is  located  in  the  same  manner  as  real  estate  of  individuals,  and 
the  personal  property  of  such  companies  in  the  tax  district  where  their  principal 
offices  are  located.  The  reports  of  corporations  as  to  personal  property  are  meager, 
and  the  assessment  thereof  by  local  assessors  is  in  practice  arbitrary  and  largely 
estimated. 

The  law  also  requires  the  capital  stock  of  every  company  liable  to  taxation,  except 
such  part  as  shall  have  been  excepted  on  the  assessment  roll  or  exempt  by  law, 
together  with  its  surplus  profits  or  reserve  funds  exceeding  10  per  centum  of  its 
capital,  after  deducting  the  assessed  value  of  its  real  estate,  and  all  shares  of  stock 
in  other  corporations  owned  and  otherwise  taxable,  to  be  assessed  at  its  actual 
value. 

Every  moneyed  or  stock  corporation  deriving  an  income  or  profit  from  its  capi- 
tal or  otherwise,  is  required  under  penalties  for  failure,  to  give  annual  verified 
written  statements  to  the  assessors  of  the  tax  district  in  which  it  is  liable  to  be 
taxed,  showing: 

First.  Its  real  property,  location,  and  unless  a  railroad  corporation,  the  sums 
actually  paid  therefor. 

Second.  The  capital  stock  actually  paid  in,  or  secured  to  be  paid  in,  excepting 
sums  paid  for  realty  and  capital  stock  held  by  the  State  and  by  any  incorporated 
literary  or  charitable  institution. 

Third.  The  tax  district  in  which  its  principal  office  is  located  or  operations 
carried  on. 

The  assessors  are  required  to  assess  corporations  liable  to  taxation  in  their 
respective  districts  as  follows: 

In  one  column,  the  name,  amount  of  capital  stock  paid,  amount  paid  for  real 
property,  amount  of  surplus  profits  or  reserve  funds  exceeding  10  per  cent  of  cap- 
ital, after  deducting  real  property  and  stock  exempt;  in  another,  the  real  property, 
except  special  franchises,  and  value  thereof;  in  another,  the  capital  stock  paid, 
and  surplus  profits  as  aforesaid,  after  deducting  sums  paid  for  real  estate  and 
amount  of  stock  exempt;  in  another,  the  value  of  any  special  franchise  owned  by 
it  as  fixed  by  the  State  board  of  tax  commissioners,  in  accordance  with  the  pro- 
visions of  the  franchise  tax  act  of  1899. 

SPECIAL  FRANCHISE  TAX. 

In  May,  1899,  the  legislature  of  New  York  passed  an  important  act  amend- 
ing the  tax  law  of  the  State  in  relation  to  the  taxation  of  public  franchises  as 
real  property.  It  provides  for  the  valuation  of  each  special  franchise  subject  to 
assessment  in  each  city,  town,  village,  or  tax  district  by  the  State  board  of  tax 
commissioners,  and  the  filing  of  a  written  statement  of  such  valuations  as  fixed 
by  said  board,  preceding  each  annual  assessment  of  property,  with  the  clerk  of 
each  city,  town,  or  village;  such  valuation  so  fixed  being  the  assessed  valuation 
on  which  all  taxes  based  on  such  special  franchises  shall  be  levied  by  the  local 
assessing  officers. 


NEW    YOKK    COKPOBATION    TAXES.  41 

For  this  purpose  every  person,  copartnership,  association,  or  corporation  sub- 
ject to  taxation  on  a  special  franchise  is  required  to  make  a  written  report  duly 
verified  to  such  board  containing  a  full  description  of  every  such  franchise  pos- 
sessed or  enjoyed,  and  a  statement  of  the  authority  under  which  the  same  is  held, 
together  with  such  other  information  relating  to  the  value  thereof  as  such  board 
may  require,  and  supplemental  reports  as  requested  by  such  board. 

Notice  of  hearing  on  each  special  franchise  assessment  is  required  to  be  given 
by  said  board  to  each  franchise  taxable. 

When  such  special  franchise  tax  is  due  and  payable,  any  tax  that  may  have 
been  paid  by  the  taxable  within  the  year  preceding  to  any  city,  town,  or  village, 
under  any  agreement  or  statute,  based  upon  a  percentage  of  gross  earnings,  or 
any  other  income  or  license  fee,  or  any  sum  of  money  on  account  of  such  special 
franchise,  is  to  be  deducted  from  such  tax  based  upon  the  assessment  of  such 
board,  and  the  remainder  shall  be  the  tax  on  such  special  franchise  payable  for 
city,  town,  or  village  purposes. 

The  imposition  of  such  special  franchise  tax  does  not  relieve  from  any  other 
tax  provided  by  law,  but  tangible  property  subject  to  such  franchise  tax  situated 
in,  upon,  under,  or  above  any  street,  highway,  public  place,  or  public  waters  is 
not  otherwise  taxable. 

The  rates  of  taxation  upon  special  franchise  assessments  is  the  same  as  on  other 
property  locally  assessed  and  equalized  and  expended  by  the  boards  of  super- 
visors of  the  several  counties.  It  is  expected  that  this  franchise  tax  will  yield 
a  large  revenue  and  relieve  real  estate  and  taxable  personalty. 

The  clerk  of  each  board  of  supervisors  is  required  to  deliver  to  the  county 
treasurer  a  statement  showing  the  names,  valuation  of  property,  and  amount  of 
tax  of  every  railroad  corporation,  telegraph,  telephone,  and  electric-light  line  in 
each  tax  district  in  the  county,  and  each  company  may,  upon  receipt  of  notice 
of  such  statement,  pay  its  tax  with  one  per  centum  fees  to  the  county  treasurer, 
who  is  required  to  credit  the  same  to  the  collector  of  the  tax  district. 

The  corporation  taxes  above  referred  to  on  real  and  personal  property,  capital 
stock,  and  special  franchises  being  mingled  in  assessment  and  taxation  with  other 
property  on  local  assessment  rolls,  we  are  unable  to  give  the  amount  of  such 
taxes  paid  by  the  several  classes  of  corporations  separately,  except  in  some 
instances  hereafter  referred  to. 

There  are,  however,  in  addition  to  the  taxes  already  referred  to,  other  special 
taxes  imposed  on  corporations  requiring  special  notice. 

ORGANIZATION  TAX. 

Every  stock  corporation  organized  under  any  law  of  the  State  is  required  to 
pay  to  the  State  treasurer  a  tax  of  one-eighth  of  1  per  cent  upon  the  amount  of 
stock  authorized  or  any  subsequent  increase  thereof.  This  does  not  apply,  how- 
ever, to  State  and  national  banks,  or  to  building,  mutual  loan,  accumulating  fund, 
and  cooperative  associations.  This  tax  yielded  in  1899  $474,667.65. 

LICENSE  TAX  ON  FOREIGN  CORPORATIONS. 

-  Every  foreign  corporation,  joint  stock  company,  or  association,  except  banking, 
fire,  marine,  casualty,  and  life  insurance  companies,  and  corporations  wholly 
engaged  in  carrying  on  manufactures  in  this  State,  cooperative  fraternal  insur- 
ance companies,  and  building  and  loan  associations,  authorized  to  do  business 
under  the  general  corporation  law,  is  required  to  pay  to  the  State  treasurer  for 
the  use  of  the  State  a  license  fee  of  one-eighth  of  1  per  cent  for  the  privilege  of 
exercising  its  corporate  franchises  or  carrying  on  its  business  in  the  State,  to  be 
computed  upon  the  basis  of  the  capital  stock  employed  by  it  during  the  first  year 
of  carrying  on  business  in  the  State. 
This  tax  was  in  1898,  $2,454.58;  1899,  $2,981.38. 

CAPITAL  STOCK  TAX  ON  CORPORATIONS. 

Every  corporation  organized  under  the  laws  of  New  York  must  also  pay  to  the 
State  treasurer  an  annual  tax,  to  be  computed  upon  the  basis  of  the  amount  of 
its  capital  stock  employed  within  the  State  at  the  rate  of  one-quarter  of  a  mill 
for  each  1  per  centum  of  dividends  made  and  declared  upon  its  capital  stock  dur- 
ing the  year,  if  the  dividend  amounts  to  6  per  cent  or  more  upon  the  par  value  of 
such  capital  stock;  if  less  than  6  per  cent  on  the  par  value  of  the  capital  stock, 
the  tax  is  at  the  rate  of  !-£  mills  upon  such  proportion  of  the  capital  stock  at  par 


42  INDUSTRIAL    COMMISSION. 

as  the  amount  of  the  capital  employed  within  the  State  bears  to  the  entire  capital 
of  the  corporation.  If  no  dividend  is  made,  the  tax  is  at  the  rate  of  1-J-  mills  upon 
each  dollar  of  the  appraised  capital  employed  within  the  State. 

If  such  corporation  has  more  than  one  kind  of  capital  stock,  and  upon  one 
dividends  amounting  to  6  or  more  per  cent  upon  the  par  value  thereof  have  been 
made  and  upon  the  other  no  dividends  made,  or  less  than  6  per  cent,  then  the 
tax  is  at  the  rate  of  one-fourth  of  a  mill  for  each  1  per  cent  of  dividends  upon  the 
former,  and  in  addition  a  tax  of  1£  mills  upon  every  dollar  of  the  valuation  of 
the  latter. 

Foreign  corporations  must  pay  a  like  tax  for  the  privilege  of  carrying  on  busi- 
ness within  the  State,  computed  upon  the  basis  of  the  capital  employed  within 
the  State. 

Certain  corporations  are  exempted  from  this  tax,  viz:  Banks,  savings  banks, 
institutions  for  savings,  insurance  or  surety  companies,  laundry  corporations, 
manufacturing  corporations  to  the  extent  of  capital  employed  within  the  State 
in  manufacturing  and  selling,  mining  corporations  engaged  in  mining  in  the 
State,  agricultural  and  horticultural  societies,  and  corporations  operating  elevated 
railways  or  surface  railroads  not  operated  by  steam,  gas,  water,  electric,  steam- 
heating,  lighting,  and  power  companies. 

TRANSPORTATION  AND  TRANSMISSION  COMPANIES. 

An  additional  excise  or  license  tax  is  imposed  upon  steam  surface  railroad, 
canal,  steamboat,  ferry,  express,  navigation,  pipe  line,  transfer,  baggage,  express, 
telegraph,  telephone,  palace,  or  sleeping-car  companies,  and  all  other  transporta- 
tion companies  except  elevated  railroads  and  surface  railroads  not  operated  by 
steam.  This  tax  is  at  the  rate  of  five-tenths  of  1  per  cent  upon  the  gross  earnings 
within  the  State,  not  including  earnings  derived  from  business  of  an  interstate 
character. 

STREET  AND  ELEVATED  RAILROADS. 

A  like  tax  is  imposed  by  the  State  on  corporations  operating  any  elevated  railroad 
or  surface  railroad  not  operated  by  steam,  amounting  to  1  per  cent  upon  gross 
earnings  from  all  sources  within  the  State,  and  3  per  cent  upon  the  amount  of  divi- 
dends declared  or  paid  in  excess  of  4  per  cent  upon  the  actual  amount  of 
paid-up  capital  employed. 

WATER,  GAS,  AND  ELECTRIC  COMPANIES,  ETC. 

Corporations  formed  for  supplying  water  or  gas,  or  for  electric  or  steam-heat- 
ing, lighting,  or  power  purposes,  must  also  pay  a  franchise  tax  of  five-tenths  of  1 
per  cent  upon  their  gross  earnings  from  all  sources  within  the  State,  and  3  per 
cent  upon  the  amount  of  dividends  declared  or  paid  in  excess  of  4  per  cent  upon 
the  actual  amount  of  paid-up  capital  employed. 

INSURANCE  CORPORATIONS. 

Every  insurance  or  surety  corporation  doing  business  in  the  State,  except  fire, 
marine,  or  casualty  companies  of  another  State,  must  pay  to  the  treasury  of  the 
State  an  annual  tax  of  five-tenths  of  1  per  cent  upon  the  gross  amount  of  premiums 
received  for  business  done  in  the  State. 

Life  insurance  companies  and  purely  mutual  benefit  associations,  whose  funds 
are  for  the  benefit  of  members,  their  families  or  heirs,  or  made  up  of  contributions 
of  members,  are  exempt  from  this  tax. 

FOREIGN  BANKERS. 

Every  foreign  banker,  corporation,  or  partnership  doing  business  in  the  State 
must  pay  to  the  treasurer  a  tax  of  one-half  of  1  per  cent  on  business  done  in  the 
State,  to  be  ascertained  by  computing  the  daily  average  for  each  month  of  business 
done  and  dividing  the  aggregate  of  such  monthly  averages  by  the  number  of 
months  during  which  business  was  done  in  the  preceding  year. 

The  special  taxes  upon  the  several  classes  of  corporations  above  enumerated 
are  based  upon  detailed,  verified  reports  of  the  corporations  to  the  State  con- 
troller, who  is  empowered  to  examine  books  and  records  and  take  testimony  and 
proofs  as  to  such  corporations.  The  special  taxes  on  corporations  above  set  forth 
are  for  State  purposes. 


NEW    YORK    CORPORATION    TAXES.  43 

The  personal  property  of  every  corporation  or  partnership  subject  to  the  fore- 

foing  special  taxes,  other  than  the  organization  tax,  is  exempt  from  taxation  for 
tate  purposes  if  such  special  taxes  have  been  paid.     This  exemption  is  regarded 
as  a  defect  in  the  corporation  tax  laws  of  New  York,  arid-it  is  claimed  that  large 
numbers  of  corporations  take  advantage  of  this  provision  to  evade  and  escape 
just  taxation. 

Another  defect  in  the  corporation  tax  law,  pointed  out  by  the  controller  in 
his  report  of  1900,  is  the  provision  referred  to,  taxing  only  so  much  of  the  capital 
of  a  corporation  as  is  "  employed  in  doing  business  in  this  State,"  as  it  is  said  to 
permit  of  the  successful  introduction  of  subterfuges  for  the  evasion  of  taxation. 
It  is  pointed  out  as  a  notorious  fact  that  very  many  corporations  whose  plants 
are  located  in  New  York  and  whose  business  is  chiefly  transacted  there  escape 
all  special  taxation  in  that  State  and  much  local  taxation  by  reason  of  being 
incorporated  in  other  States.  Changes  in  these  respects  in  the  corporation  laws 
of  New  York  are  advocated,  and  are  receiving  consideration  by  the  legislature. 

The  yield  of  the  foregoing  special  corporation  taxes  to  the  State,  other  than  the 
organization  tax,  was  as  follows  for  1899: 

Insurance  companies: 

Tax  based  on  premiums $116,620.93 

Tax  based  on  capital 8,745.60 

$125,366.53 

Transportation  companies: 

Tax  based  on  earnings 827,567.97 

Tax  based  on  capital 426, 844. 57 

1,254,412.54 

Telegraph  and  telephone  companies: 

Tax  based  on  earnings 49, 245. 94 

Tax  based  on  capital 70,932.27 

120, 178. 21 
Mining  and  miscellaneous  companies:  Tax  based  on  dividends  and 

capital  only ,. 453, 312. 30 

Foreign  and  other  State  banks 55, 089. 20 

Water  works,  gas,  electric  or  steam  heating,  lighting,  and  power 

companies:  Tax  based  on  earnings  and  dividends 255, 310. 24 

License  fees  from  foreign  corporations 2, 981. 38 

Total 2,266,650.40 

A  distinguishing  feature  of  these  sources  of  revenue  is  the  economical  manner 
in  which  the  corporation  tax  laws  are  administered.  The  amount  of  corporation 
taxes  collected  in  1899,  as  above  stated,  was  the  largest  ever  obtained,  and  the 
cost  of  collection  was  only  a  trifle  over  1  cent  on  the  dollar,  this  expense  including 
salaries  of  clerks  in  the  corporation  tax  bureau  of  the  controller's  office,  the 
expense  of  commissioners  at  the  cities  of  New  York  and  Buffalo,  and  of  expert 
examiners — in  short,  all  expenditures  connected  with  the  collection  of  corporation 
taxes. 

BANKS. 

The  law  provides  that  the  stockholders  of  every  organized  bank  in  the  State 
shall  be  assessed  and  taxed  on  the  value  of  their  shares  of  stock  therein,  such 
shares  being  included  in  the  valuation  of  the  personal  property  of  stockholders 
in  the  assessment  of  the  tax  district  where  the  bank  is  located,  regardless  of  the 
residence  of  the  stockholders  themselves. 

Every  individual  banker  is  taxable  upon  the  amount  of  capital  invested  in  his 
banking  business  in  the  district  where  the  place  of  such  business  is  located,  and 
for  that  purpose  is  deemed  a  resident  of  such  district.  He  is  required  to  make 
an  annual  report  to  the  assessors  of  such  district  of  the  amount  of  capital  invested 
in  such  banking  business,  such  capital  being  assessed  as  personal  property  to  such 
banker. 

Every  organized  bank  or  banking  association  doing  business  in  New  York  is 
required  to  make  a  duly  verified  report  of  its  condition  annually  to  the  assessors 
of  the  tax  district  in  which  the  principal  office  is  located,  and  also  to  the  State 
board  of  tax  commissioners,  showing  the  amount  of  its  authorized  capital  stock, 
the  number  and  par  value  of  shares,  the  amount  of  stock  paid  in,  the  date  and 
rate  per  cent  of  each  dividend  declared  during  the  previous  year,  the  capital 
employed  during  the  year,  the  amount  of  surplus,  amount  and  value  of  real  estate, 
a  complete  list  of  names  and  residences  of  stockholders  and  number  of  shares 
held  by  each,  and  such  other  information  as  the  State  board  may  require. 


44  INDUSTRIAL    COMMISSION. 

In  assessing  such  shares  of  stock  each  stockholder  is  allowed  all  the  deductions 
and  exceptions  allowed  by  law  in  assessing  the  value  of  other  taxable  property 
owned  by  individual  citizens  of  the  State,  and  it  is  especially  provided  that  the 
assessment  shall  not  be  at  a  greater  rate  than  is  made  or  assessed  upon  other 
moneyed  capital  in  the  hands  of  individual  citizens.  There  is  also  deducted  from 
the  value  of  such  shares  a  sum  which  bears  the  same  proportion  to  such  value 
as  the  assessed  value  of  real  property  of  such  bank  bears  to  the  capital  stock 
itself,  such  realty  being  assessed  to  the  bank. 

The  principle  of  "  stoppage  at  the  source  "  is  invoked,  and  every  bank  is  required 
to  retain  any  dividend  that  may  be  payable  until  the  delivery  of  the  tax  roll  and 
warrant  of  the  current  year,  and  within  10  days  thereafter  is  required  to  pay  the 
collector  so  much  of  the  dividend  as  may  be  necessary  to  pay  any  unpaid  taxes 
assessed  in  the  State. 

The  tax  is  made  a  lien  on  the  shares  of  stock  until  the  payment  thereof,  and  if 
stock  is  transferred  it  remains  subject  to  such  lien. 

The  shares  of  stock  are  taxed  at  local  tax  rates,  the  same  as  other  individual 
property.  The  banks  are  exempt  from  special  corporation  tax  on  capital  stock  or 
dividends. 

It  will  be  observed  that  by  this  method  the  shares  of  stock  in  fcanks  are  assessed 
at  their  full  value,  and  there  is  no  escape  from  taxation  thereof  except  by  the  abuse 
of  the  privilege  of  deduction  of  the  indebtedness  of  shareholders. 

In  conversation  with  an  eminent  lawyer  of  this  State,  who  is  counsel  for  the  State 
in  taxation  matters,  he  stated  in  a  general  way  that  the  only  property  in  the  State 
taxed  at  substantially  uniform  value  was  bank  stock,  which,  in  his  judgment,  was 
excessively  taxed  as  compared  with  other  property. 

Trust  companies  do  not  come  within  the  law  for  the  taxation  of  banks,  as  the 
courts  have  held  that,  in  a  commercial  sense,  such  companies  are  not  banks,  and 
do  not  come  within  the  bank  taxation  laws.  Their  franchises  are  not  taxable, 
and  the  value  of  stock  is  held  to  be  partly  franchise  and  not  taxable  under  pres- 
ent laws,  hence  under  the  existing  law  they  bear  a  small  proportion  of  taxation  as 
compared  with  other  banking  institutions,  with  which,  in  many  ways,  they  com- 
pete. The  report  of  the  bank  superintendent  on  savings  banks  and  trust  compa- 
nies for  1899  shows  that  the  capital,  surplus,  and  undivided  profits  of  the  trust 
companies  of  New  York  were  for  that  year  $97,000,000,  and  that  the  total  amount 
of  taxes  paid  during  the  preceding  year  was  $455,557,  the  average  rate  being  less 
than  5  mills  on  the  dollar.  They  are  apparently  regarded  as  insufficiently  taxed, 
and  some  of  the  State  and  national  banks  are  considered  too  heavily  burdened 
under  the  present  method. 

The  tax  on  foreign  banks  doing  business  in  New  York  has  been  referred  to  under 
the  head  of  corporation  taxes. 

The  deposits  in  savings  banks  which  are  due  depositors  are  exempt  from  taxa- 
tion, as  is  also  the  surplus  of  such  banks.  Such  deposits  and  surplus  amount  to 
about  a  billion  of  dollars. 

TAXATION  OF  RAILROADS. 

While  the  above  report  on  the  taxation  of  corporations  applies  to  railroads,  for 
greater  clearness  the  taxation  of  such  property  is  here  considered  separately. 

The  real  estate  of  railroads  in  New  York,  as  well  as  that  of  other  quasi-public 
corporations,  is  assessed  in  the  local  tax  district  where  it  is  situated,  by  estimate 
of  assessors  rather  than  upon  definite  reports,  and  the  tangible  personal  property 
where  the  principal  office  of  the  company  is  located.  This  property  is  mingled 
with  other  property  on  local  assessment  rolls  and  taxed  at  local  rates.  This 
class  of  property,  as  well  as  other  real  estate  and  tangible  property  locally  taxed, 
will  be  affected  by  the  franchise  tax  under  the  new  law  elsewhere  referred  to. 

Railroad  property  is  also  subject  to  the  capital-stock  and  profits  tax,  license  fee, 
gross  earnings,  and  other  indirect  State  taxes  already  referred  to. 

While  the  reports  of  State  tax  officers  do  not  show  the  amount  of  local  and 
State  taxes  paid  by  railroads  upon  the  rolls  of  local  tax  officers,  such  property 
being  mingled  with  other  local  property,  we  find  from  the  reports  of  railroad 
companies  to  the  State  board  of  railroad  commissioners  statements  of  the 
amounts  of  taxes  paid  and  value  of  property  for  the  year  ending  June  30,  1899,  as 
follows: 

Total  amount  of  taxes  paid  by  New  York  railroads. . ,  $9. 049, 639. 15 

Total  amount  paid  outside  New  York 4, 851, 257. 89 

The  amount  paid  in  New  York 4,198,381.26 


TAXATION    IN    NEW    YOEK.  45 

This  amount,  we  understand,  includes  all  taxes  within  the  State,  both  local 
and  State. 
This  report  also  shows  the  value  of  property  and  earnings  as  follows: 

Total  stock  and  debt..  ._  $1,661,388,873.00 


Gross  earnings 220, 027, 722. 90 

Operating  expenses 149,411,333.05 


Net  earnings 170,616,389.85 

These  amounts,  it  will  be  observed,  include  all  property,  values,  and  earnings 
of  New  York  railroads,  both  within  and  without  the  State.  From  this  it  appears 
that  the  rate  of  taxation  paid  by  New  York  railroads  on  the  total  amount  of  their 
stock  and  debts  within  and  without  the  State  was  0.005446  per  cent,  and  the  rate 
of  taxation  upon  their  total  gross  earnings  was  0.041  per  cent.  While  these 
rates,  of  course,  do  not  accurately  represent  the  aggregate  rates  paid  in  the  State 
of  New  York,  they  would  represent  them  approximately.  In  1899  the  joint 
committee  on  taxation  in  the  legislature,  with  a  view  to  withdrawing  from  local 
taxation  steam  railroads  and  other  quasi-public  corporations  and  taxing  them 
directly  for  State  purposes,  and  in  order  to  determine  the  feasibility  of  such  a  plan, 
made  an  investigation  in  three  counties  to  ascertain  the  proportion  of  the  total 
tax  raised  in  the  said  counties  by  such  companies,  and  found  that  in  the  county 
of  Oswego  in  1897  the  sum  of  $627,759.82  was  raised  by  taxation  for  all  purposes, 
and  that  of  this  sum  the  steam  railroads  paid  9.03*per  cent;  in  Cattaraugus 
County  in  1898  $484,358.22  was  raised  for  all  purposes,  and  of  this  sum  the  steam 
railroads  paid  11.89  per  cent;  and  in  Chenango  County  in  1897  $317,837.69  was 
raised,  and  of  this  sum  steam  railroads  paid  7.97  per  cent. 

In  some  school  districts  in  the  counties  named  the  steam  railroads  alone  paid 
50  per  cent  of  the  taxes. 

The  committee  said  that  the  labor  involved  in  the  exact  ascertainment  of  taxes 
paid  by  such  corporations  was  so  great  that  more  counties  could  not  be  analyzed, 
but  it  is  safe  to  say  that  these  three  counties  furnish  a  criterion  for  the  rest  of  the 
State. 

ELEVATED  STEAM   RAILROADS. 

The  value  of  property,  amount  of  gross  earnings,  and  amount  of  taxes  paid  by 
these  roads  for  the  year  ending  June  30,  1899,  are  as  follows: 

Capital  stock  and  debt  .  $139,099,921.86 

Cost  of  road  and  equipment -. .     109,100,839.90 


Gross  earnings 10, 777, 139. 50 

Operating  expenses. 6, 771, 528. 23 


Net  earnings 4,005,611.27 

Taxes  and  miscellaneous 966, 701. 13 

What  portion  of  the  amount  is  represented  by  miscellaneous  we  are  unable  to 
state,  but  presumably  the  greater  part  of  it  is  taxes. 

SURFACE   STREET   RAILROADS. 

The  valuation  and  amounts  of  gross  earnings  and  taxes  paid  by  these  roads  for 
the  year  ending  June  30,  1899,  are  as  follows: 

Capital  stock  and  debt..                   $318,040,804.88 

Gross  earnings 35,460,822.71 

Net  earnings    .                  .                                                -  14,318,259.08 

Taxes 1,661,449.06 

EXCISE  TAX  ON  SALES  OF  LIQUOR. 

The  amount  realized  by  the  State  of  New  York  from  this  source  for  the  year 
1899  was  $4,231,278.55,  being  one-quarter  of  the  total  taxes  paid;  the  remaining 
three-quarters  being  retained  by  local  tax  districts. 


46  INDUSTEIAL    COMMISSION. 

TRANSFER  OR  INHERITANCE  TAX. 

A  tax  greatly  favored  in  New  York  is  the  inheritance  tax,  imposed  upon  the 
transfer  of  property,  real  or  personal,  of  the  value  of  $500  or  over,  or  of  any  inter- 
est therein  or  income  therefrom,  in  trust  or  otherwise,  to  persons  or  corporations 
not  exempt  by  law  from  taxation  on  real  or  personal  property,  in  the  following 
cases: 

v  First.  When  the  transfer  is  by  will  or  by  the  intestate  laws  of  the  State,  from 
any  person  dying  possessed  of  the  property  while  a  resident  of  the  State. 

Second.  When  the  transfer  is  by  will  or  intestate  law,  of  property  within  the 
State,  and  the  decedent  was  a  nonresident  of  the  State  at  the  time  of  his  death. 

Third.  When  the  transfer  is  of  property  made  by  a  resident,  or  by  a  nonresi- 
dent of  property  within  the  State,  by  deed,  grant,  bargain,  sale,  or  gift,  made  in 
contemplation  of  the  death  of  the  grantor,  vendor,  or  donor,  or  intended  to  take 
effect  after  death. 

Fourth.  Such  tax  is  imposed  when  any  person  or  corporation  becomes  benefi- 
cially entitled  to  property  or  income  thereof  by  any  such  transfer. 

The  tax  is  fixed  by  law  at  the  rate  of  5  per  cent  upon  the  clear  market  value  of 
such  property;  but  where  the  property  or  interest  passes  1$>  direct  or  lineal 
descendants  enumerated  in  the  act  it  is  not  taxable  unless  it  is  personal  property 
of  the  value  of  $10,000  or  more,  in  which  case  it  is  taxable  at  the  rate  of  1  per 
cent  on  the  clear  market  value. 

This  tax  is  made  a  lien  upon  the  property  transferred,  and  the  transferee  and 
the  administrator,  executors,  and  trustees  of  every  estate  so  transferred  are  made 
personally  liable  for  such  tax  until  payment.  If  a  foreign  executor,  adminis- 
trator, or  trustee  assigns  or  transfers  any  stock  or  obligation  in  the  State  stand- 
ing in  the  name  of  or  in  trust  for  a  decedent  liable  to  any  transfer  tax,  such  tax 
must  be  paid  to  the  treasurer  of  the  proper  county  on  the  transfer  thereof. 

No  safe-deposit  company,  bank,  or  other  institution,  person,  or  persons  holding 
securities  or  assets  of  the  decedent  can  legally  deliver  or  transfer  the  same  to  the 
executor,  administrator,  or  legal  representative  of  said  decedent  unless  notice 
of  the  time  and  place  of  such  intended  transfer  is  served  upon  the  county  treas- 
urer or  controller  at  least  5  days  prior  to  such  transfer. 

All  transfer  taxes  levied  and  collected  are  paid  into  the  treasury  of  the  State 
for  the  use  of  the  State. 

The  amount  of  transfer  taxes  collected  in  1899  was  $2,194,612.24,  an  increase  of 
$197,402  over  the  previous  year,  being  the  largest  amount  returned  to  the  State 
in  any  one  year  except  1893,  when  4  large  estates  paid  over  $1,100,000  taxes. 

The  number  of  estates  on  which  such  tax  was  paid  was  2,721;  the  number 
appraised  during  the  year  was  3,549,  in  which  orders  assessing  the  tax  were 
made  in  2,895  and  654  were  held  exempt. 

The  records  of  transfers  during  a  limited  period,  prior  to  the  death  of  the  party 
whose  estate  might  be  liable  to  this  tax,  are  closely  scrutinized  to  determine 
whether  any  such  transfers  were  made  in  contemplation  of  death. 

REPORT  OF  THE  JOINT  COMMITTEE. 

In  1899  a  resolution  was  adopted  by  the  legislature  of  New  York  reciting  the 
unsatisfactory  condition  of  the  tax  laws  of  the  State,  and  the  necessity  for  their 
modification  and  revision  upon  a  just  and  wise  basis,  and  providing  for  the  selec- 
tion of  a  joint  committee  of  the  senate  and  assembly  for  the  purpose  of  examin- 
ing and  considering  the  subject  and  reporting  thereon. 

The  committee  employed  eminent  counsel,  and  made  a  thorough  investigation 
of  the  subject  of  taxation,  holding  meetings  in  various  portions  of  the  State,  and 
giving  hearings  to  various  classes  of  property  interests.  Its  report  recommended 
material  changes  in  the  existing  system  of  taxation. 

Referring  to  the  fact  that  many  intelligent  and  thoughtful  persons  in  the  State 
advocated  reform  of  taxation  by  exempting  personal  property  entirely  and  levy- 
ing all  taxes  upon  real  estate,  the  committee  expressed  the  opinion  that  a  vast 
majority  of  the  people  of  the  State  disagreed  with  such  a  proposition  and  believed 
the  burdens  of  taxation  to  be  best  distributed  by  the  taxation  of  different  classes 
of  property  in  the  hands  of  its  actual  owners  and  the  burdens  now  borne  by  real 
estate  to  be  unduly  grievous.  But  the  committee  did  not  believe  that  any  change 
in  existing  tax  laws  looking  to  increased  assessment  of  personalty  would  meet  the 
condition  without  the  adoption  of  the  so-called  listing  system,  which  it  was  loath 
to  recommend  because  it  has  invariably  been  disappointing  in  its  ultimate  results 
and  was  deemed  inquisitorial  and  repugnant  to  the  true  American  spirit.  Capital 
has  left  the  jurisdiction  of  the  State  where  it  has  been  tried.  The  committee 
declared,  however,  the  sentiment  of  the  people  to  be  such  that  unless  a  system 
of  taxation  is  adopted  which  will  compel  the  payment  of  a  larger  proportion 


TAXATION    IN    NEW    YORK.  47 

of  the  public  burden  by  personal  property,  the  State,  although  a  commercial 
State,  will  be  forced  to  adopt  a  statute  similar  to  those  of  Ohio  and  Illinois,  com- 
pelling every  citizen  to  list  his  entire  property  for  taxation. 

The  committee  formed  the  opinion,  which  it  positively  expressed,  that  the  most 
practical  reform  in  the  existing  tax  laws  in  the  State  lies  in  the  direction  of  rais- 
ing State  revenues  otherwise  than  by  the  direct  levy  upon  the  assessed  valuations 
of  real  and  personal  property  by  annual  bills,  and  laid  it  down  as  a  fundamental 
principle  of  government  that  such  a  political  entity  as  a  State  should  have  an 
independent  jurisdiction,  into  which  it  alone  may  go  and  from  which  it  may 
realize  sufficient  revenue  for  its  own  support. 

The  committee  therefore  sought  for  subjects  of  taxation  which,  together  with 
the  revenue  now  collected  by  the  State,  would  be  sufficient  for  the  support  of  the 
State  government. 

At  the  outset  it  was  believed  that  this  purpose  might  be  accomplished  by  with- 
drawing from  local  taxation  steam  and  surface  railroads,  telegraph,  telephone, 
electric  light  and  power  companies,  gas,  water,  and  pipe-line  companies,  and 
banks  and  trust  companies,  and  by  levying  upon  such  corporations  a  definite, 
fixed  rate  of  taxation  for  State  purposes.  A  careful  analysis,  however,  of  the 
proportionate  amounts  raised  for  State,  county,  city,  town,  school,  and  highway 
purposes  in  certain  counties  which  were  regarded  as  a  reasonable  criterion  for  the 
whole  State,  showed  that  this  plan  was  not  feasible,  and  it  was  speedily  abandoned. 

Other  suggestions  were  carefully  considered  and  pursued  up  to  the  point  where 
their  impracticability  or  injustice  was  demonstrated..  Among  others  were  the 
propositions  to  tax  the  entire  stock  of  all  corporations  in  the  hands  of  individuals; 
to  tax  the  entire  deposits  and  surplus  of  savings  banks,  amounting  to  about  a 
billion  of  dollars,  now  exempt,  and  to  place  an  excise  license  tax  upon  various 
forms  of  business  according  to  the  amount  of  business  done  each  year,  the  latter 
being  regarded  as  undesirable  for  the  reasons  given  for  rejecting  alisting  system. 
The  latter,  if  embarked  upon,  should  be  gradually  done,  and  if  adopted  should  be 
the  result  of  a  system  of  education  upon  the  subject,  as  in  Pennsylvania. 

The  committee  recommended  raising  the  additional  revenue  required  for  State 
purposes  by  a  tax  on  mortgages,  already  referred  to,  which  would  yield  $10,000,000; 
a  tax  of  1  per  cent  upon  the  stock  of  national  and  State  banks  and  trust  companies, 
the  value  of  shares  to  be  determined  by  adding  together  the  capital  stock,  surplus, 
and  undivided  profits,  and  deducting  therefrom  the  assessed  value  of  their  real 
estate,  which  would  continue  to  be  assessed  locally.  This  tax  it  was  estimated 
would  yield  about  $3.000,000,  which,  with  the  mortgage  tax  and  present  revenue  of 
the  State,  would  produce  a  sum  adequate  for  the  support  of  the  State  government. 

The  advantages  anticipated  from  these  recommendations  are  summarized  as 
follows: 

First.  There  would  be  no  necessity  for  the  equalization  of  assessments  between 
counties. 

Second.  The  burden  of  taxation  upon  the  owners  of  real  estate  would  be  reduced 
to  the  extent  of  about  $10,000,000. 

Third.  The  new  taxes  would  be  uniform  throughout  the  classes  and  certain 
and  unvarying  in  their  application.  Payment  would  be  enforced,  if  need  be,  as 
in  the  case  of  real-estate  tax,  by  divesting  the  owner  of  his  title.  No  mortgages 
would  escape.  There  would  be  no  deduction  of  debts  and  no  exemptions.  Con- 
sequently there  would  be  no  opportunity  for  tax  dodging,  and  no  occasion  for 
the  discontent  which  the  tax-paying  owners  of  personalty  now  so  generally  and 
so  rightly  feel,  because  others,  as  well  or  better  able  to  pay,  manage  in  one  way 
or  another  to  avoid  their  just  share  of  the  burden. 

Fourth.  The  new  taxes  would  be  collected  without  any  mischievous  inquisi- 
torial process.  Mortgages  are  generally  spread  upon  the  public  records,  and  the 
special  policy  of  other  laws  has  already  opened  the  affairs  of  banks  and  trust  com- 
panies to  the  supervision  of  public  officials. 

Fifth.  Counties,  towns,  and  other  local  subdivisions  would  raise  no  taxes, 
except  for  their  own  purposes  exclusively,  and  consequently  the  entire  responsi- 
bility would  be  centered  upon  the  local  officials. 

The  committee  also  suggested  that  there  should  be  a  material  increase  in  the 
taxation  of  corporations  incorporated  in  other  States  and  paying  to  other  States 
an  organization  or  capital  stock  tax  and  yet  doing  business  in  New  York  and 
employing  their  capital  there.  New  York,  the  committee  said,  can  not  afford 
to  ignore  much  longer  the  discriminating  legislation  of  other  States  with  refer- 
ence to  the  organization  and  taxation  of  corporations. 

The  bill  embodying  the  foregoing  recommendations  which  was  prepared  by  the 
committee  and  presented  to  the  legislature,  although  receiving  quite  careful 
consideration,  was  not  passed;  but  we  were  informed  that  it  was  received  with 
favor  by  legislators  and  the  public  generally,  and  was  likely  to  receive  further 
consideration. 


NEW  JERSEY. 

The  segregation  of  State  from  local  taxes  is  the  distinguishing  feature  in  the 
system  of  taxation  in  this  State.  Since  the  year  1884  there  has  been  no  direct 
State  tax  levied  on  real  and  personal  property,  the  revenues  derived  from  the 
special  tax  on  railroad  and  canal  corporations,  riparian  lands,  the  franchise  tax 
on  miscellaneous  corporations,  the  tax  on  intestate  estates  and  collateral  inher- 
itances, and  official,  judicial,  and  other  fees  being  sufficient  to  defray  all  State 
expenses. 

The  general  system  of  taxing  corporations  directly  by  the  State  is  efficient, 
simple,  certain,  and  economical  so  far  as  it  extends. 

The  confusion  in  the  scattered  and  fragmentary  laws  of  New  Jersey  upon  the 
subject  of  taxation  renders  it  exceedingly  difficult  to  ascertain  and  determine 
just  what  the  existing  system  as  to  the  general  property  tax  is,  in  all  its  details. 

This  confusion  is,  according  to  the  statements  of  the  State  tax  commission, 
one  of  the  principal  causes  of  improper  or  negligent  administration  of  the 
tax  laws,  and  the  means  by  which  much  of  the  evasion  of  proper  taxation  is 
accomplished. 

The  codification  of  the  laws  relating  to  taxation  is  greatly  needed  and  would 
alone  improve  the  taxation  of  property  in  that  State. 

LOCAL  TAXES. 

The  principal  form  of  local  taxation  is  upon  an  ad  valorem  valuation  of  real 
and  personal  property  not  exempt  as  returned  by  assessing  officers  in  local  taxing 
districts. 

A  poll  tax  not  to  exceed  $l-is  also  assessable  to  every  male  inhabitant  of  full 
age,  excepting  volunteer  soldiers  and  sailors,  paupers,  and  insane  persons,  which 
is  not  generally  enforced,  especially  in  the  cities  where  it  is  less  popular  than  in 
the  country  districts. 

GENERAL  PROPERTY  TAX. 

By  a  constitutional  provision,  all  property  is  required  to  be  assessed  for  taxa- 
tion under  general  laws  and  by  uniform  rules  according  to  its  true  value;  and  the 
statutes  of  the  State,  following  out  this  constitutional  provision,  expressly  direct 
that  property  shall  be  assessed  according  to  its  full  and  actual  value.  The  mean- 
ing of  the  phrase  "true  value"  has  been  construed  by  the  courts  to  be  that 
amount  of  money  that  any  given  piece  of  property  would  exchange  for  in  money, 
or  the  amount  of  money  its  holder  would  be  willing  to  sell  it  for  when  not 
obliged  to  sell — that  is,  its  real  market  value. 

The  usual  exemption  from  taxation  is  granted  to  the  property  of  charitable, 
educational,  religious,  and  public  institutions,  and  also  limited  exemptions  to 
soldiers,  sailors,  firemen,  and  veterans.  The  amount  of  exemptions  allowed  under 
these  heads  in  1899  was  nearly  $100,000,000  of  property  valuation,  and  the  State 
board  of  taxation  notes  the  gross  abuse  of  these  privileges  and  recommends  the 
greatest  possible  limitation  thereof  consistent  with  sound  public  policy. 

Stocks  and  other  personalty  situated  outside  the  State,  owned  by  citizens  of  the 
State,  upon  which  taxes  are  shown  to  have  been  assessed  and  paid  where  located 
within  12  months  prior  to  the  date  of  assessment  in  New  Jersey,  are  exempt  from 
taxation. 

The  assessment  of  property  in  general  is  made  by  a  single  officer  elected  in  each 
township  and  borough  for  a  term  of  3  years;  but  in  many  municipalities  the 
assessors  are  variously  appointed  or  elected,  and  are  variously  designated  as 
assessors,  commissioners  of  assessment  of  taxes,  commissioners  of  assessment, 
or  board  of  assessment  and  revision  of  taxes.  These  boards  consist  of  1,  2,  3,  or 
5  members,  with  clerks  to  assist  them. 

All  property,  real  and  personal,  including  exempt  property,  is  required  to  be 
annually  assessed  by  such  officers  at  its  true  value.  Real  estate,  individual  or 
48 


TAXATION    IN    NEW    JERSEY.  49 

corporate,  is  required  to  be  assessed  in  the  local  taxing  district  where  it  is  located, 
and  to  each  inhabitant  liable  to  such  tax  at  the  place  of  his  residence.  The  per- 
sonal property  of  nonresidents  is  taxed  in  the  taxing  district  where  situated.  The 
personal  property  of  corporations  is  assessed  in  the  taxing  district  where  the  prin- 
cipal office  is  located;  and  if  there  is  no  principal  office,  in  the  township  or  ward 
where  the  operation  of  such  company  is  carried  on.  Pipes  under  ground,  whether 
owned  by  individuals  or  corporations ,  are  taxable  as  real  estate  in  the  township 
where  such  pipes  are  located. 

DEDUCTIONS  FOR  DEBTS. 

Any  person  or  corporation  in  the  State  is  entitled  to  deductions  of  bona  fide 
indebtedness  from  the  assessment  of  real  and  personal  estate,  providing  a  verified 
statement  is  made  to  the  assessor  of  the  debts  owing  and  desired  to  be  deducted, 
to  whom  owing,  and  where  creditors  reside,  and  also  a  statement  of  the  total 
amount  of  real  and  personal  property  of  the  taxpayer,  including  mortgages  held 
and  other  debts  due  and  owing  from  solvent  debtors,  and  also  a  statement  showing 
when  the  indebtedness  for  which  said  deduction  is  claimed  was  incurred  and  a 
detailed  list  of  the  securities  or  property  claimed  to  be  exempt  from  taxation  and 
of  the  dates  of  purchase  of  such  securities  or  property,  together  with  a  declara- 
tion under  oath  that  such  indebtedness  was  not  incurred  or  securities  or  property 
purchased  with  intent  to  escape  taxation,  but  in  good  faith.  Penalties  are 
imposed  for  making  a  false  statement  and  for  transferring  property  to  escape 
taxation.  It  is  specially  provided  that  no  deduction  shall  be  made  from  the 
taxable  value  of  real  estate  on  account  of  the  indebtedness  of  the  owner  to  any 
State  or  national  bank,  but  such  deductions  may  be  made  from  personalty. 

Mortgages  on  real  or  personal  property  are  not  assessable  for  taxation  unless  a 
deduction  therefor  shall  have  been  claimed  by  the  owner  of  the  property  and 
allowed  by  the  local  assessors,  in  which  case  they  are  assessable  for  taxation  by 
such  assessor,  and  the  taxes  are  payable  where  the  property  covered  by  the  mort- 
gage is  located. 

The  State  board  has  adopted  a  rule  requiring  each  assessor  to  notify  assessors 
in  other  districts  of  deductions  claimed  for  debts  due  from  creditors  therein. 

By  an  act  known  as  the  "  five  counties  act,"  it  is  made  lawful  for  owners  of 
land  in  the  counties  of  Hudson,  Essex,  Union,  Bergen,  and  Passaic,  and  in  the 
cities  of  Trenton,  New  Brunswick,  and  Camden  to  enter  into  agreements  with 
holders  of  mortgages  on  lands  therein  not  to  apply  for  any  deductions,  by  reason 
of  any  mortgage,  from  the  taxable  value  of  such  lands. 

The  counties  and  cities  named  in  this  act  lie  contiguous  to  New  York  City,  and 
to  this  fact  the  act,  one  of  the  most  curious  statutes  in  American  tax  legislation, 
making  one  tax  law  for  one  part  of  a  State  and  a  different  law  for  the  remainder, 
is  attributable.  Prior  to  1869  New  Jersey  had  a  uniform  law  for  taxing  mort- 
gages, providing  that  the  person  giving  a  mortgage  should  pay  the  tax  on  it  and 
deduct  the  tax  from  the  principal  or  interest  in  settling  with  his  creditor,  the 
result  of  which  was  that  mortgages  falling  due  were  foreclosed  and  new  loans 
were  not  readily  obtainable.  In  1869  a  statute  was  enacted  exempting  from 
taxation  mortgages  in  the  growing  counties  near  New  York  City,  for  the  relief  of 
the  inhabitants  of  those  particular  counties.  This  was  modified  by  the  "five 
counties  act "  above  referred  to,  which  is  still  in  force,  and  which  is  said  to  oper- 
ate to  draw  capital  away  from  New  York  and  into  New  Jersey. 

Mortgages  on  lands  exempt  from  taxation  are  taxable  to  the  mortgagees  at  the 
place  of  their  residence. 

Deductions  allowed  from  the  assessed  valuation  of  property  in  1899  amounted 
to  $36,403,620,  and  the  privilege  is  said  to  be  grossly  abused  by  taxpayers  through- 
out the  State. 

BOARDS  OF  EQUALIZATION  AND  REVIEW. 

The  assessment  is  revised  and  equalized  by  township  committees,  borough 
councils,  and  the  common  councils  of  cities  and  villages,  by  county  boards  of 
equalization,  commissioners  of  appeal,  and  the  State  board  of  taxation. 

In  1891  the  State  board  of  taxation  was  established,  for  the  equalization,  revis- 
ion, and  enforcement  of  taxation.  This  board  is  composed  of  four  members,  no 
more  than  two  members  of  which  may  belong  to  the  same  political  party.  They 
have  power  and  authority  to  hear  and  determine  the  appeals  of  individuals,  cor- 
porations, and  municipalities  from  tax  assessment,  and  to  make  such  rules,  orders, 
recommendations,  and  directions  as  they  may  deem  necessary  to  secure  the  revis- 
ion, equalization,  and  enforcement  of  taxation  within  the  State.  They  are  empow- 
ered to  investigate  the  methods  of  local  assessors,  and  may  cause  assessments  to 


50  INDUSTRIAL    COMMISSION. 

be  made  under  their  direction,  and  by  another  assessor  if  the  local  assessor  fails 
to  comply  with  the  law  or  the  directions  of  the  board.  The  members  of  such 
board  receive  an  annual  compensation  of  $2,500  each,  and  are  required  to  make 
an  annual  report  and  such  recommendations  as  to  laws  and  methods  of  taxation 
as  they  may  deem  advisable  to  the  State  legislature. 

The  efforts  of  this  board  have  been  efficient  in  obtaining  improvement  in 
assessments,  in  correcting  errors,  and  in  procuring  improvement  in  legislation 
arid  administration  of  taxation  laws  generally. 

As  before  stated,  real  and  personal  property  generally  is  relieved  from  State 
taxation  and  assessed  for  local  purposes  only,  except  as  to  an  apportioned  State 
school  tax.  The  assessment  of  corporate  property  for  local  purposes  will  be 
referred"  to  under  a  subsequent  head. 


counties  from  92.6  per  cent  and  7.4  per  cent,  respectively, to  64.6  percent  and  35.3 
per  cent;  the  proportion  of  personalty  assessed  in  agricultural  counties  being 
much  greater  than  in  the  counties  containing  large  cities. 

While  the  separation  of  the  State  and  local  taxes  removes  tMe  principal  cause 
for  rivalry  among  assessors  for  relief  from  State  taxes  through  undervaluation, 
there  is  still  an  apportionment  among  local  taxing  districts  of  a  State  school  tax, 
tending  to  some  extent  to  induce  competitive  undervaluation,  and  through  that 
and  local  causes  the  evils  resulting  from  defective  assessments  by  local  assessors 
still  exist  in  a  marked  degree,  notwithstanding  the  removal  of  the  cause  mentioned. 

The  tax  commission  of  1897,  in  the  discussion  of  the  local  system,  says  that  the 
assessors  do  not  comply  with  the  constitutional  mandate  and  make  "the  assess- 
ments upon  a  standard  of  true  value,  but  assess  at  less  than  true  value;  nor  as 
a  rule  do  they  succeed  in  listing  and  taxing  all  the  intangible  property  subject  to 
taxation.  This  is  noticeably  so  in  cities,  resulting  in  part  from  inherent  diffi- 
culties,  and  in  part  from  the  fact  that  local  public  sentiment  does  not  encourage 
and  support  the  local  assessor  in  resorting  to  such  inquisitorial  methods,  so  called, 
as  seem  necessary  to  unearth  and  reach  all  of  this  class  of  property. 

Mr.  James  F.  Busling,  one  of  the  tax  commission,  in  a  special  report,  considers 
this  subject  more  fully,  and  refers  to  the  varieties  and  differences  in  the  valuation 
and  assessment  of  real  estate  in  all  parts  of  the  State  and  to  the  escape  of  personal 
property  from  taxation  almost  altogether,  particularly  in  the  large  cities,  as  shown 
by  the  evidence  presented  by  the  commission. 

He  says  there  are  about  400  separate  assessors  and  boards  of  assessors  in  the 
State,  and  nearly  as  many  different  rules  of  valuation  and  assessment.  As  offi- 
cially reported,  "  each  assessor  seems  to  be  a  law  unto  himself."  Their  valuation 
in  no  two  counties  agree,  nor  scarcely  in  any  two  cities  or  townships  of  the  same 
county.  Referring  to  the  fact  that  all  assessors  take  an  oath  that  they  have  val- 
ued and  assessed  "  all  property  liable  to  taxation  in  their  several  cities  and  town- 
ships at  its  full  and  true  value,  at  such  price  as  it  would  sell  for  at  a  fair  and  bona 
fide  sale  by  private  contract,"  he  says  in  practice  they  value  real  estate  from  25 
to  75  per  cent  of  its  true  value,  depending  on  the  location  and  personal  or  political 
prejudices,  and  value  different  contiguous  areas  at  different  valuations,  though  of 
equal  values  really;  and  as  to  personal  property  they  appear  to  make  no  earnest 
or  honest  effort  to  reach  it  anywhere  except  in  agricultural  districts,  and  even 
there  very  imperfectly.  This  practice  has  proceeded  so  far  in  New  Jersey,  he 
says,  that  it  is  now  literally  true  that  "  about  the  only  ones  who  now  pay  honest 
taxes  on  personal  property  are  the  estates  of  decedents,  widows,  orphans,  idiots, 
and  lunatics." 

It  is  such  inequalities  and  inequities,  he  says,  "  that  sadden  and  exasperate  our 
fellow-citizens  and  make  the  cry  of  '  equal  taxation  '  an  easy  rallying  cry  for  the 
demagogue  and  anarchist." 

The  State  board,  in  1891,  when  first  appointed  and  upon  a  general  survey  of  these 
conditions,  take  a  philosophical  view  thereof  and  say  that  there  is  a  total  absence 
of  uniformity  and  equality  in  the  assessments  of  New  Jersey,  should  not  excite 
surprise  so  much  as  the  fact  that  there  is  not  more  inequality  and  injustice  by  the 
337  assessors,  all  acting  independently  of  each  other,  and  all,  in  fact,  trying  to 
impose  on  one  another  fior  the  purpose  of  favoring  their  friends  and  localities. 

While,  as  above  stated,  the  efforts  of  the  State  tax  board  to  "  bring  about  a 
more  equitable,  just,  and  lawful  state  of  affairs  "  have,  in  recent  years,  resulted 
in  substantial  improvement  in  assessments  and  administration  of  the  tax  laws 
generally,  and  they,  as  well  as  the  tax  commission,  have  recommended  remedial 
legislation,  the  progress  in  this  direction  has  been  slow. 


NEW    JEKSEY    CORPORATION    TAXES.  51 

The  defects  in  the  general  property  assessment  referred  to  have  an  important 
bearing  upon  the  comparison  of  railroad  taxation  with  that  of  general  property, 
as  shown  in  the  investigation  of  the  tax  commission  hereinafter  referred  to. 

TAXATION  OF  CORPORATIONS. 

The  contributions  of  corporations  in  general,  except  railroad  and  canal  compa- 
nies, to  the  revenues  of  the  State  and  municipal  governments  are  received  from: 

First.  A  tax  upon  the  privilege  of  incorporating. 

Second.  A  license  fee  or  franchise  tax  to  the  State. 

Third.  A  local  tax  upon  real  estate  and  visible  personal  property  by  munici- 
palities. 

By  the  act  of  1875  no  tax  of  any  kind  was  imposed  upon  the  franchise  or  privi- 
lege of  incorporating.  No  tax  was  laid  upon  the  capital  stock,  and  it  was  declared 
that  the  real  and  personal  estate  of  all  corporations  thereafter  found  should  be 
taxed  the  same  as  that  o£  individuals.  The  purpose  of  the  legislature  was  to  treat 
the  property  and  business  of  corporations  in  the  same  way  as  that  of  natural  per- 
sons, and  the  only  restrictions  imposed  were  such  as  were  thought  necessary  for 
the  protection  of  stockholders  and  creditors. 

INCORPORATION  FEE. 

Not  until  1883  was  any  fee  in  the  nature  of  a  tax  required  to  be  paid  on  filing  a 
certificate  of  incorporation,  and  no  change  in  this  fee  has  been  made  since  then. 

The  payment  required  on  filing  such  certificate  is  20  cents  for  each  $1,000  of  the 
total  amount  of  capital  stock  authorized,  but  in  no  case  less  than  $25.  A  further 
fee  of  20  cents  per  thousand  of  increase  is  charged  upon  increase  of  capital  stock,  and 
like  fees  upon  consolidation  where  an  increase  of  capital  stock  is  authorized.  The 
secretary  of  state  received  for  fees  and  taxes  from  corporations  under  the  general 
corporation  act  and  supplement  in  1899,  $726,133.61.  (Controller's  report,  p.  15. ) 

From  the  1st  of  January  to  the  1st  of  August.  1899, 1 ,336  corporations  were  organ- 
ized under  the  laws  of  New  Jersey,  with  an  authorized  capital  of  $2,000,000,000. 

FRANCHISE  TAX. 

In  1884  franchise  taxes,  in  addition  to  the  local  taxes  upon  real  and  personal 
property,  were  first  imposed  upon  corporations,  and  in  this  year  it  was  provided 
that  a  certain  annual  tax  by  way  of  license  for  its  franchises  should  be  paid  by 
all  corporations,  except  certain  corporations  en  joying  special  privileges,  which,  at 
present,  are  railway,  canal,  banking  and  trust  companies,  savings  banks,  ceme- 
teries, religious  corporations,  and  charitable  or  educational  associations;  also 
manufacturing  or  mining  companies,  at  least  50  per  cent  of  whose  capital  stock 
issued  and  outstanding  is  invested  in  mining  or  manufacturing  carried  on  within 
the  State. 

Two  methods  of  determining  such  franchise  tax  are  provided  for: 

First.  By  computing  a  per  cent  of  gross  receipts  or  gross  earnings. 

Second.  A  per  cent  of  the  capital  stock. 

The  first  method  is  applied  to  certain  specified  corporations  doing  business 
within  the  State,  wherever  chartered,  and  the  second  to  corporations  incorporated 
under  the  laws  of  the  State,  whether  exercising  their  functions  within  or  without 
the  State. 

TAX  ON  GROSS  RECEIPTS  OR  EARNINGS. 

Every  telegraph,  telephone,  cable,  or  electric-light  company  not  owned  by  a 
railroad  company  and  otherwise  taxed,  every  gas  company,  palace,  parlor,  or 
sleeping-car  company  incorporated  under  the  laws  of  the  State,  every  fire,  marine, 
live-stock,  casualty,  or  accident  insurance  company  doing  business  in  the  State, 
except  mutual  fire-insurance  companies,  which  do  not  issue  policies  on  the  stock 
plan,  is  required  on  or  before  the  first  Tuesday  in  May  in  each  year  to  make  a 
return  to  the  State  board  of  assessors,  and  to  pay  an  annual  franchise  tax,  as 
follows: 

TELEGRAPH,    TELEPHONE,   CABLE,   AND  EXPRESS   COMPANIES. 

These  are  required  to  report  to  the  State  board  of  assessors  the  gross  amount  of 
their  receipts  from  business  done  in  the  State  for  the  year  ending  January  1  next 


52  INDUSTRIAL    COMMISSION. 

preceding,  and  are  required  to  pay  to  the  State  an  animal  license  fee  of  2  per  cent 
of  such  gross  earnings. 

In  1899,  the  gross  receipts  of  such  companies  amounted  to  $878,784.87  and  the 
tax  to  $17,575.67. 

GAS  AND   ELECTRIC  LIGHT  COMPANIES. 

s  These  companies  pay  annually  one-half  of  1  per  cent  of  the  gross  amount  of 
receipts  for  light  or  power  supplied  within  the  State  and  5  per  cent  of  the  divi- 
dends in  excess  of  4  per  cent  paid  or  declared  by  such  companies.  The  tax 
amounted  in  1899  to  $39,812.49. 

PARLOR,   PALACE,   AND  SLEEPING   CAR   COMPANIES. 

These  pay  an  annual  franchise  tax  of  2  per  cent  of  the  gross  amount  of  the 
receipts  for  fare  or  tolls  for  transportation  of  passengers  within  the  State.  In 
1899  this  tax  amounted  to  $1,220. 

OIL   OR  PIPE   LINE  COMPANIES. 

These  pay  a  tax  of  eight-tenths  of  1  per  cent  of  the  amount  of  their  gross  receipts 
from  the  transportation  of  oil  or  petroleum  in  the  State,  or  if  a  part  of  their  trans- 
portation line  is  without  the  State  upon  such  proportion  of  the  total  gross  receipts 
of  such  company  as  the  length  of  line  within  the  State  bears  to  the  total  length  of 
the  line.  In  1899  this  tax  amounted  to  $10,758.20. 

LIFE  INSURANCE   COMPANIES. 

Life  insurance  companies  incorporated  under  the  laws  of  the  State  are  required 
to  pay  a  license  and  franchise  tax  of  1  per  cent  of  the  amount  of  their  surplus  on 
the  31st  day  of  December  each  year,  and  in  addition  thereto  an  annual  license  fee 
or  franchise  tax  of  thirty-five  one-hundredths  of  1  per  cent  upon  the  total  gross 
insurance  premiums  collected  by  such  companies;  but  it  is  provided  that  any 
charges  or  taxes  imposed  by  the  State  upon  life  insurance  companies  of  other 
States  shall  be  applied  in  rebate  of  such  taxes.  Such  franchise  tax  in  1899,  less 
the  rebate  of  $11,577.73,  amounted  to  $190,964.84. 

Insurance  companies  other  than  life  pay  an  annual  franchise  tax  of  1  per  cent 
of  the  gross  amount  of  premiums  received  by  such  companies  for  insurance  within 
the  State  upon  property  or  persons  within  the  State.  In  1899  such  tax  amounted 
to  $7,452.09. 

SURETY  COMPANIES. 

Surety  companies  pay  an  annual  franchise  tax  of  2  per  cent  of  the  gross  amount 
of  premiums  received  by  them.  In  1899  such  tax  amounted  to  $861.13. 

FRANCHISE  TAX  ON  CAPITAL  STOCK. 

All  other  corporations  liable  to  a  franchise  tax  on  their  capital  stock  as  afore 
said,  such  as  street  railways,  manufacturing  companies,  etc.,  pay  to  the  State  an 
annual  license  fee  or  franchise  tax  of  one-tenth  of  1  per  cent  on  all  amounts  of 
capital  stock  issued  and  outstanding  up  to  and  including  the  sum  of  $3,000,000;  on 
all  sums  of  capital  stock  issued  and  outstanding  in  excess  of  $3,000,000  an  annual 
franchise  tax  of  one-twentieth  of  1  per  cent,  and  the  further  sum  of  $50  per  annum 
per  $1,000,000,  or  any  part  thereof,  on  all  amounts  of  capital  stock  issued  and  out- 
standing in  excess  of  $5.000,000.  Such  tax  in  1899  amounted  to  $1,063,991.53. 

This  tax  was  imposed  simply  for  the  purpose  of  additional  revenue,  and  the 
rates  were  made  low  in  pursuance  of  the  long-established  policy  of  encouraging 
rather  than  burdening  the  aggregation  of  capital  for  the  purpose  of  business.  It 
is  not  regarded  as  a  property  tax,  but  as  a  franchise  tax.  Franchises  are  not 
taxable  as  property. 

The  tax  is  computed  upon  the  basis  of  the  capital  stock  issued  and  outstanding, 
not  upon  authorized  capital  stock,  and  it  is  held  that  stock  is  issued  when  the 
company  has  received  and  accepted  subscriptions  for  the  same,  whether  paid  or 
not. 

As  long  as  the  corporation  exists  it  is  liable  for  this  franchise  tax.  It  contin- 
ues after  a  receiver  has  been  appointed,  and  until  the  dissolution  of  the  company. 


NEW    JEESEY    CORPORATION    TAXES, 


53 


Summary  of  franchise  tax  in  1899. 


Character  of  business. 

Num- 
ber. 

Tax. 

101 
4 
32 
8 
9 
1 
30 
5,289 

$39,812.49 
190,  964.  84 
7,  452.  09 
861.13 
10,  758.  20 
1,  220.  00 
17,  575.  67 
1,063,991.53 

Life  insurance  companies  incorporated  in  New  Jersey  

Surety  companies              

Oil  or  pipe  line  companies                                         

Parlor  palace  or  sleeping  car  companies 

Telegraph  telephone  cable,  and.  express  companies  

Companies  taxed  on  capital  stock 

Total                                           

5,469 

1,  332,  635.  95 

SPECIAL  FRANCHISE  TAX. 

In  March,  1900,  the  legislature  of  New  Jersey  passed  an  act  for  the  taxation  of 
all  the  property  and  franchises  of  persons,  copartnerships,  associations,  or  corpo- 
rations using  or  occupying  public  streets,  highways,  roads,  or  other  public  places, 
except  municipal  corporations,  railroads.,  ana  canals,  withdrawing  such  property 
from  taxation  under  the  general  State  franchise  tax  above  referred  to  and  now 
in  force,  and  subjecting  such  property  to  the  following  franchise  tax: 

The  respective  assessors,  or  officers  having  like  powers  and  duties  to  perform  in 
each  taxing  district,  are  required  each  year  to  ascertain  the  value  of  such  prop- 
erty located  in,  upon,  or  under  any  public  street,  highway,  road,  lane,  or  other 
public  place  in  each  taxing  district,  and  the  value  of  property  not  so  located; 
when  so  ascertained,  all  such  property  shall  be  assessed  and  taxed  at  local  rates 
as  now  provided  by  law. 

The  local  assessors  are  required  annually  to  make  certified  return  in  writing 
of  the  valuation  of  all  property  assessed  under  the  provisions  of  this  act,  which 
is  located  in,  upon,  or  under  any  street,  highway,  road,  lane,  or  other  public  place 
in  such  taxing  district,  together  with  the  names  of  the  owners  and  those  operating 
the  same,  and  file  it  in  the  office  of  the  State  board  of  assessors, 

All  persons,  copartnerships,  associations,  or  corporations  subject  to  taxation 
under  this  act  are  required  to  return  to  the  State  board  of  assessors  a  statement 
showing  the  gross  receipts  of  their  business  in  New  Jersey  for  the  year  ending 
December  31  next  preceding.  Any  oil  or  pipe  line ,  having  part  of  its  transportation 
in  this  State  and  part  outside  of  the  State,  is  required  to  make  a  report  showing 
its  gross  receipts  for  transportation  on  its  whole  line,  together  with  a  statement 
of  the  length  of  its  whole  line  and  the  length  of  its  line  in  New  Jersey,  along  any 
street,  highway,  road,  lane,  or  other  public  place,  and  the  franchise  tax  of  such 
company  for  business  done  in  this  State  is  upon  such  proportion  of  its  gross 
receipts  as  the  length  of  its  line  in  this  State  bears  to  the  length  of  its  whole  line. 
Such  statements  are  to  be  verified,  and  a  penalty  is  attached  for  failure  or  neglect 
to  make  such  statement. 

An  annual  franchise  tax  of  2  per  cent  on  the  annual  gross^  receipts  as  aforesaid 
shall  be  assessed  upon  all  persons,  copartnerships,  associations,  or  corporations 
taxable  under  this  act.  This  franchise  tax  is  to  be  apportioned  by  the  State  board 
of  assessors  to  the  various  taxing  districts  in  proportion  to  the  value  of  the  prop- 
erty located  in,  upon,  or  under  any  public  street,  highway,  road,  lane,  or  public 
place  therein,  as  shown  by  the  statement  so  filed  with  the  State  board,  and  the 
taxes  so  apportioned  are  collectable  in  the  local  districts. 

The  franchise  taxes  imposed  by  this  act  are  to  be  in  lieu  of  all  other  franchise 
taxes  now  assessed  against  the  persons,  copartnerships,  associations,  or  corpora- 
tions subject  to  the  provisions  of  this  act  and  their  property,  and  the  act  is  not  to 
apply  to  any  corporation  which  has  not  hitherto  or  may  not  hereafter  exercise 
any  municipal  franchise. 

The  real  and  personal  property  of  such  persons  and  corporations  will  be  assess- 
able locally  as  other  property. 

The  provisions  of  this  act  took  effect  January  1.  1901. 

LOCAL  TAXATION  "OF  CORPORATIONS. 

All  corporations  excepting  railway,  turnpike,  insurance,  canal,  or  banking  cor- 
porations, savings  banks,  cemeteries,  church,  or  purely  charitable  or  educational 
associations  are  assessed  on  their  real  and  personal  property  for  purposes  of  tax- 
ation the  same  as  natural  persons,  and  are  permitted  deductions  for  debt  the  same 
as  individuals. 


54  INBUSTKIAL    COMMISSION. 

The  stock  of  corporations,  except  banks,  is  not  assessable  in  the  hands  of  the 
individual  holders,  nor  their  bonds,  except  when  deductions  for  the  same  have 
been  claimed  and  allowed  to  the  corporation.  The  property  is  taxable  to  the  com- 
pany, and  the  capital  stock  as  such  is  not  assessed,  only  such  property  as  actually 
within  the  State  being  taxed  in  this  way. 

It  is  the  law  and  universal  practice,  as  advised  by  the  State  board  of  taxation 
to  the  various  assessors  of  the  State,  to  list  and  assess  corporate  property,  both 
real  arid  personal,  in  the  taxing  district  where  located  or  found.  It  is  said  to  be 
the  common  practice  of  the  most  capable  and  experienced  assessors  to  measure 
the  true  value  of  such  property  for  local  assessment  by  the  cost  of  reproduction, 
making  allowance  for  the  natural  wear  and  tear  and  depreciation  from  use.  The 
value  is  thus  determined  by  the  estimate  and  judgment  of  the  local  assessor, 
"  each  being  a  law  unto  himself."  Such  property  is,  of  course,  taxed  at  local  rates 
as  other  property. 

Manufactories  and  mills  are  said  to  be,  as  a  rule,  favored  by  the  assessors  in 
cities,  while  assessed  higher  in  the  country  districts;  it  being  the  disposition  of 
the  people  in  cities  to  favor  this  class  of  property — first,  because  they  employ  a 
large  amount  of  labor,  and,  second,  because  much  of  the  value  of  a  manufacturing 
plant  is  unstable,  depending  upon  the  success  of  the  enterprise 

The  real  and  personal  property  of  street  railways,  telephone,  telegraph,  electric, 
gas,  and  water  companies  is  said  by  the  State  board  to  be  systematically  assessed 
in  taxing  districts  where  such  companies  operate,  the  basis  of  computation  of 
value  being  as  a  rule  the  cost  of  reproduction  less  a  percentage  allowed  for  depre- 
ciation by  the  assessor.  Pipes  underground  are  assessed  as  real  estate  in  the  place 
where  located. 

Insurance  companies  are  assessed  and  taxed  locally  at  the  full  amount  of  their 
capital  stock  paid  in  and  accumulated  surplus,  after  deducting  the  value  of  prop- 
erty in  which  the  stock  and  surplus  are  invested,  which  is  by  law  not  taxable,  and 
real  estate  which  has  been  separately  assessed  to  such  company. 

Savings  banks  without  capital  stock  are  assessed  and  taxed  for  the  full  amount 
of  their  property  and  valuable  assets,  without  any  deductions  for  debts  and  liabil- 
ities. Those  having  capital  stock  are  taxed  the  same  as  insurance  companies 
above  set  forth. 

Safe  deposit,  guarantee,  and  trust  companies  are  assessed  and  taxed  locally  at 
the  full  amount  of  their  capital  stock  paid  in  and  accumulated  surplus,  after 
deducting  property  in  which  such  stock  and  surplus  is  invested  which  is  not  tax- 
able, and  real  estate  separately  assessed  to  such  companies  is  not  assessable  in  the 
hands  of  its  holders. 

BANKS. 

The  shares  of  stock  in  National  and  State  banks  in  New  Jersey  are  assessed  to 
the  owners  thereof  in  the  place  where  they  reside  in  case  of  residents,  and  in 
the  place  where  the  'bank  is  located  in  case  of  nonresident  shareholders.  In  the 
latter  case  the  tax  assessed  is  a  lien  upon  the  stock,  which  may  be  levied  upon  and 
sold  for  said  tax;  and  it  is  made  the  duty  of  the  bank  upon  demand,  for  that  pur- 
pose made  by  the  collector,  to  pay  the  amount  of  tax  assessed  against  such  non- 
resident shareholders,  and  to  retain  the  amount  so  paid  out  of  the  dividends,  and 
the  bank  is  given  an  express  lien  upon  such  stock  for  any  taxes  paid  thereon. 

No  obligation  is  imposed  upon  banks  with  respect  to  the  payment  or  collection 
of  taxes  on  the  shares  of  resident  holders,  and  there  is  considerable  confusion 
and  lack  of  uniformity  in  the  assessing  of  banks  and  bank  stock  throughout  the 
State. 

It  is  made  the  duty  of  officers  of  banks,  when  applied  to  by  the  assessor,  to  give 
him  a  statement  under  oath  of  the  names  of  the  stockholders  and  of  the  amount 
of  capital  stock,  surplus,  and  other  property  and  assets;  and  the  assessor  is 
authorized  to  take  such  other  means  as  may  be  in  his  power  to  ascertain  the  true 
amount  for  which  stockholders  should  be  assessed. 

No  means  are  provided  by  law,  however,  for  notifying  assessors  throughout  the 
State  of  the  stock  of  residents  in  their  respective  districts  in  banks  outside  said 
districts  and  taxable  therein. 

In  the  absence  of  legislative  provisons  in  that  regard,  the  State  board  has  tried 
to  secure  uniformity  of  taxation  of  shares  of  resident  holders  by  supplying  local 
assessors  with  a  list  of  names  and  addresses  of  the  taxing  officers  throughout 
the  State,  and  to  secure  an  interchange  of  information  with  respect  to  resident 
stockholders  and  the  taxable  value  of  their  stock,  each  assessor  being  requested 
to  procure  a  list  of  stockholders  in  banks  in  his  district  and  notify  other  assessors 
in  the  State  where  any  stockholders  may  reside  of  the  amount  and  value  of  their 
shares.  The  failure  of  assessors  to  strictly  comply  with  this  rule  results  in  great 


NEW    JEESEY    CORPORATION    TAXES.  55 

lack  of  uniformity  in  the  assessment  of  bank  shares.  It  has  been  held  that  the 
value  per  share  at  which  bank  stock  is  to  be  assessed  is  properly  determined  by 
dividing  the  capital  stock,  surplus  fund,  and  undivided  profits  of  a  bank,  as  shown 
by  statements  to  the  comptroller  of  the  State,  by  the  number  of  shares,  but  there 
is  no  central  authority  to  determine  such  value  and  assess  it  uniformly  throughout 
the  State. 

A  recent  statute  also  provides  that  all  real  estate  of  any  bank  shall  be  assessed 
to  the  bank  where  such  real  estate  is  located  in  the  same  manner  as  real  estate  of 
individuals,  and  the  amount  of  such  assessment  deducted  from  the  assets  of  said 
bank  in  estimating  the  assessable  value  of  the  shares  of  stock.  The  shares  of 
resident  stockholders  are  taxed  at  local  rates,  and  the  stock  of  a  bank  is  obviously 
taxed  at  as  many  different  rates  as  there  are  shares  in  different  taxing  districts. 

There  is  no  direct  State  tax  levied  upon  the  property  of  banks  or  upon  bank 
shares. 

It  is  claimed  on  the  one  hand  that  much  of  this  class  of  property  escapes  taxa- 
tion entirely,  and  on  the  other,  complaint  is  made  that  in  many  taxing  districts 
it  is  taxed  more  excessively  and  at  a  higher  percentage  than  other  classes  of 
personal  property. 

RAILROAD  AND  CANAL  COMPANIES. 

The  system  of  taxation  of  railroad  and  canal  companies  may  be  described 
briefly  as  a  property  tax  by  the  State,  through  State  assessors  or  officers,  with  a 
distribution  of  a  part  of  the  tax  by  the  State  to  the  local  taxing  districts  for  the 
support  and  maintenance  of  the  local  and  municipal  governments. 

Property  used  for  railroad  and  canal  purposes  is  segregated  from  the  property 
owned  by  other  corporations  and  individuals,  and  is  valued,  assessed,  and  taxed 
as  a  class  by  itself. 

The  property  of  railroad  and  canal  companies  not  used  for  railroad  and  canal 
purposes  is  assessed  and  taxed  by  the  same  assessors,  in  the  same  manner,  and  at 
the  same  rate  as  the  taxable  property  of  other  property  owners  in  the  same 
municipal  division  or  taxing  district.  The  property  of  railroad  and  canal  com- 
panies used  for  railroad  and  canal  purposes  is  assessed  by  the  State  board  of 
assessors,  which  meets  annually  for  that  purpose,  and  is  required  in  such  valua- 
tion to  ascertain — 

First.  The  length  and  value  of  the  main  stem  of  each  railroad  and  of  the  water- 
way of  each  canal,  which  is  held  to  include  the  roadbed,  not  exceeding  100  feet 
in  width,  with  its  rails  and  sleepers,  and  depot  buildings  used  for  passengers  con- 
nected therewith,  and  the  length  of  such  main  stem  and  waterway  in  each  taxing 
district,  whether  city,  village,  township,  or  borough;  the  above  being  designated 
as  "  first-class  property  "  or  "  main  stem." 

Second.  The  value  of  the  other  real  estate  used  for  railroad  or  canal  purposes 
in  each  taxing  district  in  this  State,  including  the  roadbed  (other  than  main  stem) 
waterways,  reservoirs,  tracks,  buildings,  waterworks,  riparian  rights,  etc. ,  usually 
designated  as  '*  second-class  "  property. 

Third.  The  value  of  all  the  tangible  personal  property  of  each  railroad  and 
canal  company,  which  includes  all  rolling  stock,  locomotives,  cars,  ferryboats,  all 
machinery,  and  other  tangible  personal  property  of  railroad  or  canal  companies; 
also  the  locomotives  and  cars  not  belonging  to  such  railroad  company,  but  built 
for  its  uses  and  actually  used  in  the  State  or  under  its  control  in  the  State  by  sleep- 
ing car  or  other  companies. 

Fourth.  The  value  of  remaining  property,  including  franchises. 

The  State  board  of  assessors  may  require  a  complete  statement  and  description 
of  the  property  of  such  companies  in  the  various  taxing  districts  to  be  furnished 
by  the  assessors  of  such  districts,  showing  the  property  used  and  that  not  used 
for  railroad  and  canal  purposes. 

Every  railroad  and  canal  company  is  also  required  to  file  annually  with  such 
board  a  sworn  statement,  showing  the  nature  and  extent  of  its  property  in  each 
taxing  district  as  it  existed  on  the  1st  day  of  January  last  past,  and  showing  in 
detail  its  real  estate,  total  length  of  road,  including  branch  and  leased  lines,  length 
within  the  State,  length  of  double  or  side  tracks,  number  and  value  of  all  buildings 
and  structures,  rolling  stock,  and  tangible  personal  property;  also  a  statement 
showing  the  amount  of  capital  stock  authorized  and  the  number  of  shares,  amount 
of  capital  stock  paid  up,  the  market  value,  or  if  no  market  value,  the  actual 
value  of  the  shares  and  the  total  amount,  and  the  details  and  particulars  of  all 
indebtedness. 

Where  the  property  of  any  railroad  or  canal  company  is  leased  to  or  operated 
by  any  other  corporation,  foreign  or  domestic,  such  property  is  assessed  to  the 


56  INDUSTRIAL    COMMISSION. 

lessor,  and  if  the  lessee  or  operating  company,  being  a  foreign  corporation,  has 
property  other  than  that  derived  from  the  leasing  company,  it  is  taxed  upon  such 
property  as  any  domestic  company.  Any  tangible  personal  property  of  such 
foreign  company,  if  used  but  part  of  the  time  within  the  State,  is  assessed  such 
proportionate  part  of  its  value  as  the  time  for  which  it  is  used  bears  to  the  whole 
year. 

The  same  deductions  for  debts  are  allowed  as  in  the  case  of  private  individuals. 

Upon  the  completion  of  this  valuation  and  assessment  the  State  board  proceeds 
to  compute  the  tax  upon  the  entire  assessed  valuation.  Each  company  pays  to 
the  State  a  tax  at  the  rate  of  one-half  of  1  per  cent  annually  upon  each  dollar  of 
its  entire  valuation — i.  e.,  on  all  property  included  in  the  above  4  classes  or  sub- 
divisions. Until  the  year  1897  all  this  tax  was  paid  into  the  State  treasury,  and 
was  used  exclusively  by  the  State  for  State  purposes.  In  1895  this  tax  amounted 
to  $1,103,529,  levied  upon  a  valuation  of  railroad  and  canal  property  of  $220,705,822. 

By  an  act  of  1897  the  amount  of  such  tax  which  is  assessed  to  the  property 
described  in  subdivision  2,  and  designated  second-class  property,  is  required  to  be 
paid  over  to  the  taxing  district  through  which  such  railroads  or  canals  run,  giving 
to  each  district  the  amount  of  taxes  assessed  to  the  property  of  each  railroad  or 
canal  company  therein. 

Besides  this  tax  of  one-half  of  1  per  cent  of  their  valuation,  Viich  companies 
are  required  to  pay  to  the  State  a  tax  at  the  local  rate  as  fixed  by  the  local  taxing 
district  in  which  such  property  is  located,  for  county  and  municipal  purposes,  on 
the  property  included  in  subdivision  2,  provided  that  such  tax  shall  in  no  case 
exceed  1  per  cent  of  the  valuation. 

The  tax  is  paid  to  the  State  treasurer,  and  the  State  controller  pays  the  amount 
of  such  tax,  together  with  the  respective  shares  of  such  districts  in  the  tax  levied 
at  one-half  of  1  per  cent  aforesaid,  to  the  various  county  collectors  or  city  treasurers. 

In  1895  this  local  tax  amounted  to  $410,882.13  upon  a  valuation  of  $41,120,216. 
The  total  tax  paid  in  1895  by  railroad  and  canal  companies  amounted  to 
$1,514,411.24. 

In  1899  the  total  valuation  amounted  to  $222,216,534,  the  State  tax  (one-half  of  1 
per  cent)  on  first-class  property  retained  being  $907,636.22,  and  the  whole  tax  on 
second-class  property  $610,192.96,  made  up  of  the  one-half  of  1  per  cent  tax 
($203,446.45)  and  the  tax  at  local  rates  ($406,746.51).  The  total  tax  paid  by  rail- 
road and  canal  companies  in  1899  was  $1,517,829.19. 

The  State  thus  receives  from,  railroad  and  canal  companies  a  tax  of  one-half  of 
1  per  cent  upon  the  total  assessed  valuation,  after  deducting  the  value  of  the 
second-class  property  described  in  subdivision  2.  The  local  taxing  districts 
receive  a  tax  of  1-J-  per  cent  upon  the  assessed  valuation  of  such  second-class 
property,  1  per  cent  being  the  local  rate. 

It  seems  to  be  generally  conceded  that  under  this  system  such  property  is 
assessed  at  its  full  cash  value,  but  whether  this  class  of  property  pays  a  propor- 
tionate amount  of  taxes  as  compared  with  a  like  amount  in  the  hands  of  individu- 
als or  corporations  subject  to  the  general  property  tax  is  a  question  about  which 
there  has  been  considerable  contention. 

It  is  obvious  that  if  it  be  assumed  that  the  constitutional  and  statutory  require- 
ments as  to  valuation  are  carried  out  by  assessors,  and  all  property  assessed  at 
full  values  under  both  systems,  the  taxation  of  one  as  compared  with  the  other  is 
not  uniform  and  equal,  the  rate  of  taxation  upon  the  one  being  one-half  of  1 
per  cent  on  the  whole  and  1  per  cent  additional  on  a  portion,  while  the  ''average  " 
rate  upon  the  other  in  the  various  taxing  districts  in  the  State  was,  in  1895,  accord- 
ing to  the  report  of  the  State  board  of  taxation,  $17.20  per  $1.000  of  valuation. 

It  is  conceded,  however,  that  under  the  general  property  tax  substantially  all 
assessed  property  is  greatly  undervalued,  while  a  large  part  of  the  property 
escapes  entirely,  which  facts  must  be  taken  into  consideration  in  attempting  a 
comparison. 

The  tax  commission  of  New  Jersey,  in  1897,  undertook  to  make  such  a  com- 
parison of  the  taxes  paid  by  railroads  and  canals  with  the  taxes  paid  by  individuals 
and  other  corporations.  Evidence  and  arguments  pro  and  con  were  made  and 
submitted,  and  schedules  were  made  under  different  methods  of  comparison.  One 
set  of  schedules  showed  that  railroads  derived  an  advantage  in  taxes  and  the  other 
that  they  were  paying  in  excess  of  their  just  share  of  taxes. 

The  commission  in  its  report  says  that  the  varying  schedules  illustrate  "how 
impracticable  it  is  to  compare  two  things  which  are  essentially  dissimilar;  how 
difficult  and  unsatisfactory  it  is  to  make  a  correct  and  just  comparison  of  two 
systems  of  taxation  based  upon  dissimilar  principles.  Such  comparisons  may  be 
useful  in  a  general  way  and  for  the  most  general  purposes,  but  they  are  unsuited 
to  base  tax  legislation  upon,  without  a  principle,  which  should  always  be  the  pri- 


TAXATION    IN    NEW    JEESEY.  57 

mary  consideration,  and  the  figures  secondary.  And  whether  the  one  set  of  fig- 
tires  is  mathematically  correct,  or  approximately  so,  or  the  other,  is  of  small 
moment  in  the  view  which  the  commission  takes  of  this  branch  of  the  subject, 
viz.,  the  act  of  1884,  as  amended  1888,  (the  present  system  of  taxing  railroads), 
should  not  be  disturbed,  except  as  indicated." 

While  this  does  not,  in  express  terms,  state  that  such  property  is  justly  and 
equitably  taxed  as  compared  with  other  property,  that  is  the  logical  inference  to 
be  drawn  from  the  positive  approval  of  the  existing  system,  and  failure  to  recom- 
mend any  change  in  the  rates  of  taxation  of  such  property. 

One  of  the  commissioners,  Mr.  Jas.  F.  Rusling,  who  joined  in  the  report  of  the 
commission,  in  a  special  report  discusses  the  subject  of  comparison  more  fully, 
and  says: 

' '  In  effect  this  system  yields  a  tax  of  one-half  of  1  per  cent  on  all  railroad 
property  (except  what  is  not  used  for  railroad  purposes) ,  for  the  use  and  benefit 
of  the  State,  and  amounted  in  1895  to  $1,514,411.24.  It  is  true  this  taxes  railroad 
property  only  one-half  of  1  per  cent  in  part  and  only  !-£  per  cent  as  to  the  rest. 
But  the  listing  of  railroad  property  has  been  made  so  thorough  and  complete,  and 
the  valuations  fixed  so  high  and  true  by  the  State  board  of  assessors  that,  so  far 
as  appeared  in  evidence  before  the  commission,  this  class  of  property  seems  now 
to  pay  its  just  and  full  share  of  taxes  in  New  Jersey.  Indeed,  the  State  board  of 
assessors  in  their  annual  report  for  189.4,  page  7,  declare:  '  It  can  be  proven  by 
facts  and  figures,  beyond  any  question,  that  the  railroad  corporations  (of  New 
Jersey)  are  paying  to-day  more  taxes  in  proportion  to  their  ownings  than  are  the 
individual  taxpayers  of  the  State,'  and  in  their  report  for  1896  (p.  6)  they  reiterate 
this  opinion.  And,  besides,  they  pay  their  taxes  regularly  every  year  to  the  last 
dollar  assessed  against  them,  without  any  deduction  for  debts  or  otherwise,  and 
without  costing  the  State  a  dollar  to  collect  them.  Let  us  then  be  fair  to  our 
railroads.  They  constitute  a  large  item  in  the  tax  ratables  of  the  State,  and  from 
the  official  reports,  exhibits,  and  other  evidence,  produced  before  the  commission, 
it  is  but  just  to  say  they  do  not  appear  to  be  in  fault  on  this  line." 

INHERITANCE  TAX. 

A  tax  for  the  use  of  the  State  of  $5  on  every  $100  of  value  of  all  estates  valued 
over  $500,  which  shall  pass  by  will  or  by  the  intestate  laws  of  New  Jersey,  except 
legacies  or  estates  passing  to  certain  designated  relatives  or  certain  charitable 
bequests,  is  imposed  by  law.  The  amount  received  from  this  source  in  1899 
amounted  to  $85,520.68. 

LIQUOR  LICENSES. 

The  estate  has  no  interest  in  the  amount  received  from  liquor  licenses.  These 
are  levied  by  the  various  municipalities  and  collected  by  them  for  local  uses. 


PENNSYLVANIA. 

A  distinguishing  feature  of  the  taxation  system  of  this  State  is  the  separation 
of  State  and  local  taxation. 

The  work  of  assessing  State  taxes  is  put  into  the  hands  of  a  single  tribunal, 
while  local  assessments  are  confined  strictly  to  local  purposes.  Property,  real  and 
personal,  liable  to  local  taxation  is  not  taxed  for  State  purposes,  and  vice  versa. 

Taxes  for  county,  township,  and  municipal  purposes  are  assessed  upon  real 
estate,  horses  and  cattle  over  4  years  of  age,  occupations,  professions,  and  posts  of 
profit.  Real  estate  so  taxed  does  not  include  that  essential  to  tfte  operation  of  the 
quasi-public  corporations,  that  being  included  in  the  State  taxation. 

All  this  property  is  taxable  for  local  purposes  only,  and  assessed  by  local  assess- 
ors who  have  nothing  to  do  with  State  taxes.  All  other  personal  property  is 
assessed  by  the  State  board,  but  three-fourths  of  the  State  tax  on  personal  prop- 
erty is  apportioned  to  the  several  counties  in  reduction  of  the  local  taxes.  Rev- 
enue derived  from  retail  liquor  licenses  is  also  given  up  to  counties,  townships, 
and  municipalities. 

The  taxes  for  State  purposes  are  almost  wholly  paid  by  corporations,  leaving 
individuals  subject  to  taxation  for  local  purposes  only,  except  that  the  mortgages, 
bonds,  and  other  classes  of  personal  property  taxable  under  State  laws  held  by 
them  pay  a  State  tax,  but  three-fourths  of  this  tax  is  returned  to  the  counties. 

Corporations  pay  no  local  tax  except  upon  real  estate  (and  in  case  of  railroads 
and  other  quasi-public  corporations,  not  upon  that), and  except  upon  horses  and 
cattle  owned  by  them. 

The  property  of  corporations  is  in  the  main  taxed  by  the  State  board  for  State 
purposes.  The  real  estate  of  manufacturing  companies  is  subjected  to  local  taxa- 
tion as  other  real  estate  in  the  districts  where  the  same  is  located,  but  the  capital 
stock  of  such  companies  engaged  in  manufacturing  business  is  exempt  from  tax- 
ation for  all  purposes  by  statute.  This  exemption  is  by  way  of  encouragement  to 
manufacturing  investments. 

STATE  TAXES. 

The  revenues  of  the  State  are  collected  by  two  distinct  methods  and  divided 
into  two  classes: 

First.  Taxes  paid  directly  or  through  other  State  officers  to  the  State  treasurer. 

Second.  Taxes  collected  by  county  officers,  and  by  them  paid  to  the  State 
treasurer. 

BONUS  ON  CHARTERS. 

One  of  the  sources  of  direct  revenue  for  State  purposes  is  a  bonus  on  charters 
of  corporations,  such  a  bonus  being  defined  by  the  courts  to  be  the  price  paid  the 
Commonwealth  by  a  corporation  for  the  privileges  conferred  on  such  corporation 
by  its  charter.  It  is  not  regarded  as  a  tax  in  a  legal  sense,  although  for  our  pur- 
pose it  may  be  considered  as  such,  and  it  does  not  relieve  any  corporation  from 
regular  taxation. 

The  bonus  is  fixed  by  law  at  the  rate  of  one-third  of  1  per  cent  of  the  amount  of 
authorized  capital  stock,  and  a  like  amount  on  authorized  subsequent  increases  of 
stock  on  one  class  of  corporations,  payable  before  the  charter's  issue,  and  one- 
fourth  of  1  per  cent  on  another  class,  payable  one-eighth  of  1  per  cent  before  the 
charter's  issue,  and  a  like  amount  at  the  expiration  of  one  year  from  the  date  of 
the  charter. 

The  amount  realized  by  the  State  from  this  source  in  1898  was  as  follows: 

From  incorporated  State  banks $984. 50 

From  trust  companies 7, 333. 34 

From  corporations  and  associations 438, 579. 71 

Total 446,897.55 

58 


PENNSYLVANIA    CORPORATION    TAXES.  59 

TAX  UPON  CAPITAL  STOCK. 

This  State  derives  about  one-half  of  its  public  revenue  from  the  taxation  of 
corporations.  All  such  taxes  are  assessed  and  collected  by  State  officers.  The 
principal  tax  upon  corporations  is  that  upon  capital  stock,  so  called,  to  which  all 
corporations  having  capital  stock,  except  banks,  savings  institutions,  and  foreign 
insurance  companies,  are  subject. 

The  companies  subject  to  such  tax  include  every  corporation  having  capital 
stock,  associations  and  limited  partnerships  organized  or  incorporated  by  or 
under  the  laws  of  the  State  or  incorporated  or  organized  by  or  under  the  laws  of 
any  other  State  or  Territory,  by  the  United  States,  or  by  any  foreign  government 
and  doing  business  in  and  liable  to  taxation  within  Pennsylvania  or  having  capital 
or  property  employed  within  the  State,  with  the  exceptions  above  named. 

Formerly  this  tax  was  assessed  on  the  capital  stock  on  the  basis  of  the  dividends 
paid,  but  under  an  act  passed  in  1891,  which  provides  increased  revenue  for  the 
purpose  of  relieving  the  burden  of  local  taxation  and  for  greater  uniformity,  the 
taxing  of  dividends  based  on  assessment  of  capital  stock  was  abandoned,  and  pro- 
vision was  made  for  the  assessment  of  the  capital  stock  of  all  corporations  upon 
its  true  value. 

In  the  assessment  of  capital  stock  of  corporations  by  State  officers,  the  value  of 
such  capital  stock  is  based  in  the  judgment  and  discretion  of  such  officers  upon  a 
wide  range  of  inquiry  and  investigation,  and  such  assessment  is  made  to  include 
the  actual  value  of  all  property,  franchises,  and  everything  of  value  they  possess. 

Under  the  decisions  of  the  courts  of  the  State  and  the  practice  of  State  assess- 
ing officers,  the  value  of  capital  stock  of  corporations  is  based  upon  all  the  prop- 
erty, assets,  franchises,  and  earning  capacity  of  such  corporations,  without  regard 
to  their  debts. 

As  a  factor  in  determining  such  valuations,  sworn  detailed  reports  are  required 
annually  from  officers  of  corporations,  except  banks,  savings  institutions,  and 
foreign  insurance  companies,  showing: 

(1)  The  total  authorized  capital  stock. 

(2)  Total  authorized  number  of  shares. 

(3)  Number  of  shares  of  stock  issued. 

(4)  Par  value  of  each  share. 

(5)  Amount  paid  into  the  treasury  on  each  share. 

(6)  Amount  of  capital  stock  paid  in. 

(7)  Amount  of  capital  stock  on  which  dividend  was  declared. 

(8)  Date  of  each  dividend  declared  during  the  year. 

(9)  Rate  per  cent  of  each  dividend  declared. 

(10)  Amount  of  each  dividend  during  previous  year. 

(11)  Gross  earnings  during  the  year. 

(12)  Net  earnings  during  the  year. 

(15)  Amount  of  surplus. 

(16)  Amount  of  profit  added  to  sinking  fund. 

(17)  Highest  price  of  sales  of  stock  between  the  1st  and  15th  days  of  November 
of  the  year. 

(18)  Highest  price  of  sales  of  stock  during  the  previous  year. 

(19)  Average  price  of  sales  of  stock  during  the  year,  and  also  the  sworn  esti- 
mate and  appraisement  of  two  officers  of  each  corporation  of  the  capital  stock 
at  its  actual  value  in  cash,  not  less  than  the  average  price  which  said  stock  sold 
for  during  the  previoiis  year,  and  not  less  than  the  price  or  value  indicated  or 
measured  by  net  earnings,  or  by  the  amount  of  profits  by  dividends  or  carried 
into  surplus  or  sinking  fund. 

These  reports  are  not  conclusive  upon  the  State  assessing  officers,  who  ascertain 
the  value  of  this  capital  stock  not  only  from  the  extensive  data  furnished  in  these 
sworn  reports,  but  from  information  obtained  from  other  sources. 

This  method  of  valuation  takes  into  consideration,  as  we  have  stated,  not  only 
the  franchises  or  rights  of  business,  but  the  success  of  business,  good  will,  future 
prospects,  administrative  efficiency,  and  everything  that  goes  to  make  up  the 
value  of  capital  stock. 

A  distinguished  judge  of  that  State  recently  said,  "There  is  a  tendency  in 
Pennsylvania  to  settle  down  upon  the  earning  capacity  as  the  true  subject  of  tax- 
ation." However  this  may  be,  it  seems  clear  that  everything  going  to  make  up 
the  earning  capacity  of  corporations  is  practically  taken  into  consideration  in 
determining  the  assessment  of  their  capital  stock. 

It  will  be  observed  that  the  law  requires  that  the  valuation  of  capital  stock 
shall  in  no  case  be  less  than  the  average  price  of  sales  of  shares.  The  actual  value 
may  be  much  greater,  but  in  no  case  may  it  be  less. 


60  INDUSTRIAL    COMMISSION. 

The  supreme  court,  construing  the  act  of  the  legislature  governing  the  valua- 
tion of  capital  stock  for  taxation  in  the  case  of  Commonwealth  v.  N.  Y.  P.  &  O. 
R.  R.  (188  Penn.  State  Rep.,  p.  169),  held  the  declared  purpose  to  be  to  tax  the 
capital  stock  by  ascertaining  its  value  in  view  of  the  tangible  assets  of  corpora- 
tions, what  was  owing  to  them,  the  value  of  their  franchises,  and  the  rights  and 
privileges  they  possessed  under  their  grants. 

The  question  of  the  actual  value  in  cash  of  the  capital  stock  is  a  question  of  fact 
which  must  be  determined  by  considering  the  value  of  the  company's  tangible 
property  and  assets  of  every  kind,  including  its  bonds,  mortgages,  and  money  at 
interest,  and  its  franchises  and  privileges;  and  the  amount  of  the  incumbrance  on 
its  property  and  franchises  is  also  a  relevant  fact  to  be  considered,  but  is  not 
to  be  specifically  deducted  from  the  valuation  so  ascertained  and  determined. 

Foreign  corporations  doing  business  in  Pennsylvania  are  taxable  like  domestic 
corporations,  on  so  much  of  their  capital  as  is  invested  in  the  State. 

The  fact  that  a  foreign  transportation  company  running  its  cars  into,  through, 
and  out  of  the  State,  also  operates  them  in  other  States,  does  not  exempt  the  com- 
pany from  taxes  upon  the  capital  invested  in  car»s  in  Pennsylvania. 

Palace  car  companies  whose  cars  run  into  Pennsylvania  and  other  States  are 
taxable  on  the  proportion  which  the  total  number  of  miles  traveled  in  Pennsyl- 
vania by  their  cars  bears  to  the  miles  traveled  by  all  their  cars  in  all  States. 

Railroad  companies  whose  lines  extend  from  Pennsylvania  into  other  States 
are  taxable  on  the  proportion  of  their  capital  stock  which  the  mileage  of  the  main 
track  in  Pennsylvania  bears  to  the  total  mileage  of  the  company. 

Telegraph  companies  doing  business  in  many  States,  where  the  like  value  of 
the  tangible  property  representing  capital  within  and  without  the  State  can  be 
accurately  ascertained,  are  taxed  on  the  proportion  of  their  entire  capital  stock 
which  the  length  of  their  lines  within  the  State  bears  to  the  total  length  of  all  their 
lines. 

The  capital  stock  of  corporations  representing  tangible  property  permanently 
located  outside  the  State  of  Pennsylvania  is  not  taxable. 

By  the  payment  of  the  tax  on  capital  stock,  corporations  do  not  relieve  them- 
selves from  any  local  taxation  to  which  they  would  otherwise  be  subject. 

Corporations,  except  quasi-public  ones,  are  also  taxed  locally  upon  real  estate, 
and  the  value  of  such  real  estate  is  also  included  in  the  capital  stock  valuation. 
Quasi-public  corporations  are  taxable  locally  on  real  estate  not  necessary  to  the 
operation  of  their  lines. 

It  has  been  held  that  the  tax  on  capital  stock  being  a  tax  for  State  purposes 
only,  local  taxation  upon  the  property  in  which  the  capital  stock  of  a  company 
is  invested  does  not  constitute  double  taxation. 

An  appeal  from  the  tax  assessment  of  the  State  officers  may  be  taken  by  any 
corporation  in  the  State  to  the  court  of  common  pleas  of  Dauphin  county,  where 
the  capital  of  the  State  is  located. 

Blank  forms  of  reports  of  capital  stock  for  the  use  of  different  classes  of  cor- 
porations are  prepared  by  State  officers. 

Corporations  which  pay  a  tax  upon  their  capital  stock,  or  which  are  expressly 
relieved  from  such  payment  as  in  the  case  of  manufacturing  companies,  thus 
relieve  their  shares  of  stock  from  taxation  in  the  hands  of  the  holders  thereof, 
and  are  not  required  to  make  any  report  nor  pay  any  further  tax  on  the  mortgages, 
bonds,  and  other  securities  held* by  them  in  their  own  right. 

The  rate  of  taxation  upon  capital  stock  is  fixed  by  law,  being  a  uniform  rate 
of  5  mills  upon  each  dollar  of  the  actual  value  of  the  stock. 

The  amount  actually  collected  from  this  source  during  the  year  1897  upon  a 
valuation  of  $765,518,672  was  $3,827,593.36,  or  about  29  per  cent  of  the  entire  rev- 
enue of  the  Commonwealth. 

In  1899  the  capital  stock  tax  was  $4,575,511. 

TAX  ON  LOANS  OF  PUBLIC  AND  PRIVATE  CORPORATIONS. 

The  law  also  imposes  a  tax  on  corporate  loans,  requiring  the  payment  of  4  mills 
on  the  dollar  on  all  investments  by  residents  of  the  State  in  the  bonds  and  other 
obligations  of  corporations,  public  or  private,  for  profit,  except  banks,  savings 
institutions,  and  foreign  insurance  companies. 

Instead  of  depending  upon  the  holders  of  such  obligations  returning  them  to 
the  assessors  for  taxation,  the  treasurer  of  each  corporation  is  made  the  agent  of 
the  State  for  the  collection  of  this  tax,  and  is  required  to  deduct  it  from  the  inter- 
est accruing  on  such  obligations  and  pay  it  to  the  State,  the  corporation,  however, 
being  responsible  for  its  payment.  These  obligations  of  domestic  owners  are 
then  exempt  from  taxation  in  the  hands  of  the  owner.  Obligations  held  by  non- 
residents of  the  State  in  their  own  right  are  not  taxable. 


PENNSYLVANIA    CORPORATION    TAXES. 


61 


The  amount  of  this  tax  in  1897  on  a  valuation  of  $219,994,522  was  $879,978,  or 
6.08  per  cent  of  the  entire  revenue  of  the  State.  The  amount  of  this  tax  in  1898 
was  $866,316.88,  and  in  1899,  $1,149,409. 

This  method  of  taxation  has  been  declared  to  be  constitutional  by  State  and 
Federal  courts.  It  is  practically  a  tax  upon  individual  property  in  the  hands  of 
the  individual  taxpayer. 

The  auditor  of  the  State  in  his  report  of  1897  says;  "  This  method  of  collecting 
the  tax  upon  the  obligations  of  corporations  has  been  successful,  and  has  secured 
a  tax  upon  a  class  of  securities  dificult  to  reach  through  the  local  assessors. 

TAX  ON  GROSS  RECEIPTS  OF  CORPORATIONS. 

A  tax  of  8  mills  on  the  dollar  is  imposed  upon  the  gross  receipts  of  railroad, 
street  passenger  railway,  express,  telegraph,  telephone,  and  electric-light  com- 
panies doing  business  in  the  State,  from  business  done  wholly  within  the  State; 
the  act  thus  limiting  gross  receipts  being  prepared  with  a  view  to  conformity 
with  the  interstate-commerce  clause  of  the  Constitution  of  the  United  States. 

The  treasurer  of  each  corporation  is  required  to  furnish  the  auditor-general  of 
the  State  with  a  statement  under  oath  of  the  amount  of  gross  receipts  of  such 
company  derived  from  all  sources,  and  of  gross  receipts  of  business  done  wholly 
within  the  State. 

It  is  interesting  to  note  the  method  by  which  the  gross  receipts  tax  of  companies 
doing  business  in  this  and  other  States  is  apportioned.  In  the  case  of  the  palace 
car  companies,  for  instance,  the  gross  receipts  are  taxed  as  follows:  The  company 
reports  all  the  moneys  received  for  transportation  between  places  in  Pennsylvania 
and  other  places  in  the  same  State.  It  returns  separately,  or  in  different  sched- 
ules, the  receipts  of  this  nature  earned  by  cars  running  wholly  within  the  State, 
and  in  another  schedule  such  receipts  as  are  earned  by  cars  whose  trips  are  not 
confined  to  the  State,  but  are  continued  beyond  the  borders  of  Pennsylvania,  or, 
beginning  without  the  State,  pass  through  or  terminate  in  it.  The  tax  on  gross 
receipts,  however,  is  settled  upon  the  full  amount  of  receipts  earned  wholly  in 
Pennsylvania,  so  returned,  whether  earned  by  cars  running  only  within  the  State 
or  by  those  engaged  in  interstate  commerce. 

Mr.  Frank  M.  Eastman,  from  whose  excellent  work  on  Taxation  in  Pennsylvania 
we  obtained  much  information  relating  to  taxation  in  this  State,  says:  "  So  long  as 
the  traffic  is  carried  on  within  the  State,  it  makes  no  difference  whether  the  cars 
earning  the  receipts  are  engaged  in  interstate  commerce  ©r  run  only  within  the 
State.  The  fact  that  a  car  runs  between  States  does  not  make  so  much  of  the 
traffic  carried  on  by  it,  as  is  limited  to  the  territory  of  a  given  State,  interstate 
traffic/' 

The  tax  upon  gross  receipts  of  corporations  for  1896,  such  gross  receipts  amount- 
ing to  $89,188,400,  yielded  a  revenue  of  $713,373.12,  being  5£  per  cent  of  the  total 
revenue  of  the  State  for  that  year. 

The  receipts  from  this  source  for  1895,  1896,  and  1897  were  collected  from  the 
following  classes  of  corporations: 


Class  of  corporations. 

1895. 

1896. 

1897. 

Railroads  (steam) 

$402  910  95 

$450  473.61 

$404,  429.  30 

Railways  (passenger)  .   .             

112,  797.  46 

149,  349.  20 

158,  216.  84 

Transportation  (miscellaneous) 

27,  388.  34 

47,  776.  08 

39,  938.  29 

Telegraph  and  telephone  

13,  856.  51 

22,  921.  80 

21,  669.  67 

Electric  light 

34,  254.  70 

42,  852.  43 

49,  504.  43 

Total         

591,208.06 

713,  373.  12 

673,  758.  53 

The  receipts  for  1898  were  $691,522.99,  and  in  1899  $748,214. 
This  tax  has  been  held  by  the  courts  to  be  constitutional  upon  so  much  of  the 
gross  receipts  as  are  derived  from  business  wholly  within  the  State. 

TAX  ON  PREMIUMS  OF  INSURANCE  COMPANIES. 

This  tax  is  divided  into  two  classes:  First,  tax  on  foreign  insurance  companies; 
second,  tax  on  gross  premiums  of  domestic  insurance  companies  having  capital 
stock. 

First.  The  tax  on  foreign  companies. 

These  companies  are  required  to  obtain  from  the  commissioner  of  insurance  a 
certificate  of  authority,  showing  that  the  company  or  association  is  authorized 


62  INDUSTRIAL    COMMISSION. 

to  transact  business  in  the  State;  and  as  a  condition  of  the  annual  renewal  thereof, 
the  duty  is  imposed  upon  every  such  company  or  association  to  make  report  to 
the  commissioner  in  the  month  of  January  in  each  year,  under  oath  of  the  presi- 
dent or  secretary  thereof,  showing  the  entire  amount  of  premiums  of  every  char- 
acter and  description  received  by  said  company  in  Pennsylvania  during  the  year 
or  fraction  of  the  year  ending  with  the  31st  day  of  December  preceding,  whether 
said  premiums  were  received  in  the  form  of  money,  credits,  or  any  other  substitute 
for  money,  and  to  pay  into  the  State  treasury  a  tax  of  3  per  cent  upon  said  pre- 
miums. The  commissioner  has  no  power  to  grant  a  renewal  to  such  company  or 
association  until  the  tax  is  paid  into  the  State  treasury.  This  tax  upon  foreign 
insurance  companies  has  been  held  by  the  courts  in  Pennsylvania  to  be  constitu- 
tional. 

The  tax  is  paid  directly  to  the  commissioner  of  insurance,  no  settlement  there- 
for being  made  by  the  accounting  officers.  The  commissioner  ascertains  whether 
the  amount  paid  corresponds  with  the  premiums  reported,  and  if  so,  pays  the 
money  into  the  State  treasury. 

The  law  provides  that  one-half  of  the  amount  of  this  tax  shall  be  paid  by  the 
State  treasurer  to  the  treasurers  of  the  several  cities  and  boroughs  of  the  Com- 
monwealth. 

The  amount  collected  from  these  companies  was: 

1895..                                                                                                                1  $513,616.19 

1896 548,442.18 

1897 575,829.65 

1898 620,922.08 

1899 646,775.00 

Second.  The  tax  on  gross  premiums  of  domestic  insurance  companies  having 
capital  stock. 

A  tax  of  8  mills  on  the  dollar  is  imposed,  in  addition  to  the  tax  on  capital  stock, 
upon  the  gross  premiums  and  assessments,  received  from  business  transacted 
within  the  State,  of  all  domestic  insurance  companies  except  those  doing  busi- 
ness on  the  mutual  plan  without  any  capital  stock  or  accumulated  reserve,  and 
except  purely  mutual  beneficial  associations. 

This  tax  is  based  upon  semiannual  reports  of  these  companies,  and  is  required 
to  be  paid  on  the  last  days  of  July  and  January  in  each  year.  The  revenue  from 
this  source  was: 

1895.  .  ._  $43,355.68 

1896 54,751.19 

1897. ...     54,302.13 

1899. 61,882.00 

TAX  ON  BANK  STOCK. 

A  tax  of  4  mills  on  the  dollar  is  imposed  upon  the  actual  value  of  the  shares  of 
stock  of  every  bank  or  savings  institution  incorporated  under  the  laws  of  Penn- 
sylvania or  of  the  United  States  and  represented  in  Pennsylvania. 

Each  bank  having  capital  stock  is  required  to  file  with  the  auditor-general  an 
annual  report,  under  oath  of  one  of  its  officers,  showing — 

(1)  The  full  number  of  shares  of  capital  stock  subscribed  for  or  issued  by  such 
bank  or  savings  institution,  and 

(2)  The  actual  value  thereof;  and  the  actual  value  of  the  shares  is  to  be  ascer- 
tained by  adding  together  the  amount  of 

(a)  Capital  stock  paid  in,  and 

(b)  The  surplus  and  undivided  profits. 

The  tax  is  assessed  by  the  auditor-general  on  the  actual  value  of  these  shares 
so  ascertained  and  a  copy  of  the  assessment  or  settlement  is  transmitted  to  the 
bank,  whose  duty  ?.t  is  to  post  it  in  a  conspicuous  place  in  the  bank,  so  as  to  give 
notice  of  the  valuation  to  the  stockholders. 

The  bank  may  then  within  forty  days  from  the  receipt  of  a  copy  of  such  settle- 
ment either  collect  the  tax  from  its  shareholders  or  pay  it  out  of  the  general 
fund. 

The  auditor-general  has  the  power,  and  it  is  his  duty  under  the  law,  in  case 
he  shall  not  be  satisfied  with  the  correctness  of  the  report  as  made  by  any  bank 
or  savings  institution,  to  summon  the  officers  before  him  for  examination  and 
require  them  to  bring  with  them  the  books  of  their  bank;  and  he  may  take  fur- 
ther evidence  to  satisfy  himself  as  to  the  correctness  of  the  report. 


PENNSYLVANIA    CORPOEATION    TAXES.  63 

It  is  further  provided  that  in  case  any  bank  or  savings  institution  having  capital 
stock  shall  collect  this  tax  from  the' shareholders,  and  pay  it  into  the  State  treasury 
on  or  before  the  first  day  of  March  each  year,  the  shares  and  so  much  of  the  cap- 
ital or  investment  of  such  bank  or  savings  institution  as  shall  have  been  invested 
in  real  estate  shall  be  exempt  from  local  taxation,  and  such  bank  or  savings  insti- 
tution shall  not  be  required  to  make  any  report  to  the  local  assessors  or  county 
commissioners  of  personal  property  owned  by  it  in  its  own  right  and  shall  not  be 
required  to  pay  any  tax  thereon.  While  the  law  imposing  this  tax  is  not  very 
clear  upon  the  subject,  it  is  understood  to  relieve  shares  of  stock  from  taxation 
in  the  hands  of  the  owners  thereof. 

It  is  specially  provided  that  any  bank  may  elect  in  lieu  of  the  foregoing  method 
to  collect  annually  from  its  shareholders  a  tax  of  10  mills  upon  the  par  value  of 
all  its  shares  subscribed  for  or  issued,  and  pay  the  same  to  the  State  treasury. 
There  are,  however,  but  few  banks  in  the  State  that  can  profitably  take  this 
option,  so  that  the  4-xnill  tax  is  practically  the  bank  tax  of  the  State. 

Banks  which  do  not  collect  and  pay  the  tax  on  or  before  March  1  of  each  year 
as  provided  are  subject  to  taxation  on  the  personal  property  held  by  them,  except 
in  the  case  of  national  banks. 

The  taxes  from  this  source  in  1897  amounted  to  $595,684,  and  in  1899  to  $548,800. 

Trust  companies  are  required  to  pay  the  regular  capital  stock  tax  on  the  actual 
value  of  their  property,  franchises,  etc.,  the  rate  of  taxation  being  5  mills  on  the 
dollar,  and  the  real  estate  being  taxed  for  local  purposes.  They  also  pay  the  tax 
of  4  mills  upon  loans. 

Taxes  paid  by  trust  companies  in  1898  amounted  to  $369,645.56.  The  trust  com- 
panies, it  will  be  observed,  are  taxed  at  a  higher  rate  than  banks,  the  reason  prob- 
ably being  that  they  enjoy  more  valuable  franchises  and  privileges  than  banks, 
doing  banking  business  to  all  intents  and  purposes,  and  in  addition  having  the 
right  to  do  trust  business. 

TAX  ON  NET  EARNINGS. 

Private  bankers  or  brokers,  savings  institutions,  and  corporations  not  subject 
to  a  tax  on  their  capital  stock  or  gross  premiums,  are  subject  to  a  tax  of  3  per 
cent  on  their  net  earnings  or  income. 

BUILDING  AND  LOAN  ASSOCIATIONS. 

Building  and  loan  associations  have  been  exempted  from  taxation,  but  are  now 
taxed  by  an  act  of  1897,  providing  that  upon  all  "  full-paid,  prepaid,  or  fully 
matured  "  stock  in  any  building  and  loan  association  incorporated  under  the  laws 
of  Pennsylvania  or  under  the  laws  of  any  other  State,  upon  which  annual,  semi- 
annual, quarterly,  or  monthly  cash  dividends  or  interest  shall  be  paid,  there  shall 
be  a  State  tax  equal  to  that  required  to  be  paid  upon  moneys  at  interest  by  the 
tax  laws  of  the  State,  viz.,  4  mills  on  the  dollar;  and  such  associations  are  required 
k>  make  detailed  annual  statements  to  the  auditor-general. 

EXCISE  TAX  UPON  EXPRESS  COMPANIES. 

In  July,  1897,  an  act  was  passed  providing  for  an  annual  excise  tax,  so  called, 
upon  the  corporations  or  other  associations,  partnerships,  or  individuals  engaged 
in  the  express  business.  They  are  required  to  pay  to  the  State  treasurer  for  the 
use  of  the  State  an  annual  excise  tax  for  the  privilege  of  exercising  their  fran- 
chises in  Pennsylvania.  The  amount  of  the  tax  is  ascertained  as  follows:  Each 
company,  firm,  or  person  so  taxed  is  required  to  make  under  oath  to  the  auditor- 
general  an  annual  statement  of  the  amount  of  its  express  receipts — that  is  to  say, 
the  amount  of  total  receipts  derived  by  it  from  carrying  on  the  express  business 
for  the  previous  year,  with  a  statement  of  the  total  length  of  lines  of  rail  and 
water  routes  over  which  it  was  doing  business  during  the  year.  The  gross 
amount  so  returned  to  the  auditor-general  is  divided  by  the  number  of  miles  of 
lines  to  ascertain  the  average  gross  receipts  per  mile. 

When  average  receipts  are  $100  a  mile  or  less  the  rate  is  1  per  cent;  when  the 
receipts  exceed  $100  and  do  not  exceed  $150  the  rate  is  2  uer  cent,  and  so  on,  the 
rate  of  the  tax  increasing  1  per  cent  for  each  $50  of  average  receipts  per  mile 
or  fraction  thereof,  but  never  exceeding  5  per  cent.  When  the  route  or  routes 
over  which  the  express  business  is  conducted  lie  partly  within  and  partly  without 
the  State,  the  gross  express  receipts  over  the  entire  line  or  system  within  and 
without  the  State  are  divided  by  the  total  number  of  miles  operated  to  obtain  the 


64 


INDUSTRIAL    COMMISSION. 


average  gross  receipts  per  mile,  and  the  gross  express  receipts  in  Pennsylvania 
are  taken  to  be  the  average  gross  express  receipts  per  mile  multiplied  by  the 
number  of  miles  operated  within  the  State. 

These  companies  are  also  subject  to  the  tax  on  capital  stock,  on  loans,  and  on 
gross  receipts  heretofore  mentioned. 

RAILROAD  TAXATION. 

The  railroads  of  the  State  paid  taxes  for  State  purposes  in  1898  as  follows: 

Tax  on  capital  stock  (5  mills) _ $974, 688. 64 

Tax  on  loans  (4  mills) 451,617.06 

Tax  on  gross  receipts  (8  mills) 423, 709. 04 

Total 1,850,014.74 

As  has  been  observed,  they  pay  comparatively  little  in  the  way  of  local  taxes. 
All  their  property  is  exempt  from  local  taxation  except  such  as  is  not  essential  to 
the  legitimate  operation  of  their  lines.  Such  property,  however,  is  subject  to 
local  taxation,  and  has  been  so  declared  by  the  supreme  court  of  the  State. 

In  some  of  the  counties  they  are  required  to  pay  local  taxes  on  that  portion  of 
their  real  estate  not  essential  to  the  operation  of  their  lines,  and  in  1898  they  paid 
taxes  on  such  property  amounting  to  $757,593.48,  the  larger  portion  of  which  was 
paid  in  the  counties  of  Philadelphia  and  Allegheny. 

For  the  year  1899  railroads  paid  a  tax  of  $1,833,184  on  capital  stock  valued  at 
$366,636,990,  or  $36,663  a  mile,  and  a  gross  receipts  tax  of  $451,613  upon  a  total 
of  $56,451,640  of 'gross  receipts  derived  from  traffic  wholly  within  the  State,  mak- 
ing a  total  tax  of  $2,284,797  paid  directly  to  the  State. 

In  addition,  railroads  paid  to  local  communities  for  1899  taxes  amounting  to 
$728,714. 

The  total  amount  of  taxes  paid  in  1899,  both  State  and  local,  was  $3,013,511. 

There  is  also  collected  by  the  State  through  railroad  corporations  a  tax  of  4 
mills  upon  the  par  value  of  their  loans  or  interest-bearing  indebtedness.  The  act 
taxing  all  personal  property,  as  above  set  forth,  makes  a  class  of  corporate  loans, 
bonds,  mortgages,  or  other  interest-bearing  indebtedness,  and  imposes  upon  the 
treasurer  of  the  company  the  duty  of  deducting  the  tax  of  4  mills  upon  the  nomi- 
nal or  par  value  from  the  interest  paid  to  taxable  residents  of  Pennsylvania,  and 
returning  the  amount  so  collected  directly  to  the  State  treasurer.  Nearly  all  mort- 
gages securing  such  loans  contain  covenants  providing  for  the  payment  of  inter- 
est coupons  free  and  clear  of  all  State  taxes,  the  company  thus  assuming  to  pay 
the  tax  of  the  bondholder.  The  amount  collected  from  this  source  in  1899  from 
railroads  was  $515,301,  or  a  4-mill  tax  upon  $128,825,000  of  corporate  loans. 

Taxes  paid  by  transportation  and  transmission  companies,  1898. 


Basis  of  taxation. 

Railways 
(passenger, 
street,  elec- 
tric, etc.). 

Telegraph 
and  tele- 
phone com- 
panies. 

Transporta- 
tion com- 
panies (mis- 
cellaneous), 
including 
express  com- 
panies. 

% 

Light,  heat, 
and  power 
companies. 

Tax  on  capital  stock  (5  mills)  

$676,  034.  93 

$19,  121.  91 

$293,  386.  25 

$70,  841.  21 

Tax  on  loans  (4  mills) 

74,668.77 

460.  49 

39,  196.  45 

13,  990.  09 

Tax  on  gross  receipts  (8  mills) 

163  591  49 

24  586  39 

36  246  98 

42  283.37 

Bonus  on  charters  

20,  556.  88 

9,  236.  37 

128,  806.  66 

24,  138.  44 

934,  852.  07 

53,405.16 

497,  636.  34 

151,  253.  11 

The  local  taxes  collected  on  real  estate  of  corporations  other  than  railroads  in 
1898  amounted  to  $2,501,423.60. 

STATE  TAX  FROM  COUNTIES. 

The  remainder  of  the  State  revenues  of  Pennsylvania  are  assessed  and  collected 
by  county  officers  and  by  them  paid  to  State  officers,  the  auditor-general  having 
supervisory  control  over  the  manner  of  such  assessment  and  collection.  This  tax 
is  assessed  upon  the  basis  of  sworn  reports  required  to  be  made  by  taxables 
annually,  and  upon  such  further  information  of  record  or  otherwise  as  the  assess- 
ors may  obtain. 


^^  S  R  A  H  y  ">, 

/  lliJi      TV"   I 

TAXATION    IN    PENNSYLVANM^r  65 

N^CALlfO^ 

The  rate  of  taxation  for  State  purposes  on  personal  property  of  the  following 
descriptions,  whether  owned  or  held  as  trustee  or  agent,  is  fixed  by  law  at  4  mills 
on  the  dollar  of  valuation,  viz: 

(1)  All  mortgages. 

(2)  All  moneys  owing  by  solvent  debtors. 

(3)  All  articles  of  agreement  and  accounts  bearing  interest. 

(4)  All  public  loans,  except  those  of  the  State  or  United  States. 

(5)  All  loans  issued  by  or  shares  of  stock  in  any  bank,  corporation,  or  com- 
pany, domestic  or  foreign,  or  limited  partnership,  created  or  formed  under  the 
laws  of  the  State  or  United  States  or  any  other  State  or  government,  including 
car-trust  securities  and  loans  secured  by  bonds  or  any  other  form  of  certificate 
or  evidence  of  indebtedness,  whether  the  interest  be  included  in  the  principal  of 
the  obligation  or  payable  by  the  terms  thereof,  except  shares  of  stock  in  any  com- 
pany liable  to  the  capital-stock  tax. 

(6)  Moneys  loaned  or  invested  outside  of  the  State. 

(7)  All  other  moneyed  capital  in  the  hands  of  individual  citizens  of  the  State. 

(8)  Shares  of  stock  in  foreign  corporations  held  by  residents  of  the  State  are 
taxable,  although  the  stock  of  the  companies  issuing  such  shares  is  taxable  in 
other  States.     Bonds  and  mortgages  held  by  a  resident  trustee  for  the  benefit  of 
a  nonresident  cestui  que  trust  are  held  to  be  taxable  in  this  State. 

(9)  Also  stages,  omnibuses,  hacks,  cabs,  and  other  vehicles,  and  all  annuities 
yielding  annually  over  $200. 

•  This  tax  on  personal  property  in  1898  was  $2,738,666.26  on  a  valuation  of  $684,- 
666,565.27. 

As  has  already  been  stated,  three-fourths  of  the  net  amount  of  this  tax  on  per- 
sonal property  is  returned  by  the  State  treasurer  to  the  several  counties  of  the 
State. 

There  is  a  special  significant  provision  in  the  act  making  it  unlawful  for  any 
person  or  persons  loaning  money  at  interest  to  require  the  person  borrowing  the 
same  to  pay  the  tax  imposed  thereon,  and  providing  that  in  all  cases  where  such 
tax  shall  be  paid  the  same  shall  be  deemed  and  considered  usury  and  subject  to 
the  laws  governing  the  same. 

To  facilitate  the  assessment  of  this  class  of  intangible  property  each  taxable  is 
required  to  make  to  the  local  assessor  a  sworn  detailed  statement  of  such  property 
owned  by  him,  and  heavy  penalties,  by  way  of  fine  or  imprisonment,  are  imposed 
for  making  a  corrupt  and  fraudulent  return.  The  recorder  of  deeds,  mortgages, 
and  other  instruments  in  each  county  is  required  to  keep  a  separate  detailed 
record  of  all  mortgages  or  agreements  to  secure  the  payment  of  money  and  fur- 
nish a  statement  of  such  record  on  the  first  of  each  month  to  the  county  or  city 
board  of  revision  of  taxes,  and  the  prothonotary  or  clerk  of  the  court  of  common 
pleas  in  each  county  or  city  is  required  to  keep  and  furnish  to  such  board  a  like 
record  of  every  single  bill,  bond,  judgment,  or  other  instrument  securing  a  debt 
entered  of  record  in  his  office.  It  is  the  duty  of  the  county  commissioners  or  board 
of  revision  of  taxes,  upon  obtaining  record  of  the  existence  within  any  county  or 
city  of  such  mortgages  and  other  obligations  owned  outside  of  that  county,  but 
within  the  Commonwealth,  to  transmit  a  certified  statement  of  such  record  to  the 
commissioners  or  board  of  the  county  where  such  obligations  are  owned. 

A  statement  of  such  obligations  is  in  turn  transmitted  to  the  local  assessors 
before  each  regular  assessment,  for  the  purpose  of  assessment  and  taxation  to  the 
owners  thereof. 

Upon  the  refusal  or  failure  of  any  taxable  to  make  a  properly  verified  return 
the  assessor  is  required  to  make  such  return  according  to  the  best  information  he 
can  obtain  from  the  records  or  otherwise,  which  return  the  county  board  revises 
and  corrects  according  to  the  best  information  obtainable.  It  is  the  duty  of  the 
board  to  send  for  the  taxable  and  examine  him  under  oath  as  to  such  taxable 
property,  and,  unless  satisfactory  reasons  under  oath  are  shown  for  such  failure 
or  neglect,  to  add  to  the  amount  of  the  estimate  50  per  cent,  the  aggregate 
amount  so  obtained  being  the  basis  of  taxation. 

Up  to  the  passage  of  the  act  of  1885  the  assessed  valuation  of  money  at  interest, 
including  mortgages,  judgments,  bonds,  notes,  stock,  etc.,  was  but  a  fraction  of 
the  actual  amount  of  such  property  in  the  State,  the  total  valuation  in  that  year 
being  $145.286,746;  but  under  the  improved  methods  of  listing  and  assessment, 
and  the  50  per  cent  penalty  provided  by  the  legislature,  the  valuation  was  greatly 
increased. 

The  increasing  amounts  returned  since  1891  are  as  follows: 

1891  .  .  $579,036,227  I  1895.. $620,020,507 

1892..  590,882,560     1896 670,803,246 


1893 607,664,408 

Id94  ..  616,043,542 


1897          -     675,713,437 

1898..     ..-     684,879,157 


66  INDUSTRIAL    COMMISSION. 

The  increase  in  Philadelphia  alone  was  from  $95,071,724  in  1885  to  $309,828,762 
in  1895. 

TAX  ON  COLLATERAL  INHERITANCES. 

All  estates  located  in  Pennsylvania  or  outside  of  that  State,  when  the  person 
seized  thereof  is  domiciled  in  said  State,  passing  from  any  person  dying  seized 
thereof,  either  by  will  or  otherwise,  to  any  person  other  than  father,  mother,  hus- 
band or  wife,  children,  and  lineal  descendants  born  in  lawful  wedlock,  or  the 
wife  or  widow  of  the  person  dying  possessed  thereof,  which  estates  are  of  the 
clear  value  of  $250,  are  subject  to  a  tax  of  $5  on  every  hundred  dollars  of  the  clear 
value  thereof.  The  amount  of  such  collateral  inheritance  in  1898  was  $834,855.96. 

TAX  ON  DIRECT  INHERITANCES. 

In  1897  a  law  was  enacted  which  provided  for  a  tax  of  $2  on  every  $100  of  the 
clear  value  of  all  personal  property  passing  by  will  or  by  the  intestate  laws  of 
the  State  to  any  heirs  not  subject  to  the  collateral  inheritance  tax;  but  personal 
property  so  passing,  to  the  value  of  $5,000,  was  exempted.  This  tax  has  been 
declared  void  by  the  courts  on  account  of  the  generous  exemption. 

TAX  ON  WRITS,  WILLS,  DEEDS,  ETC. 

A  State  tax  of  $3.50  is  imposed  on  every  writ  of  error  issued  or  appeal  granted 
by  the  supreme  court,  and  a  tax  of  50  cents  on  every  writ  issued  by  the  inferior 
courts,  and  of  25  cents  on  every  transcript  of  a  judgment  of  a  justice  of  the  peace 
or  alderman.  Recorders  of  deeds  are  required  to  collect  for  the  use  of  the  State 
50  cents  for  every  instrument  offered  for  record.  Registers  of  deeds  collect  50 
cents  for  the  probate  of  each  will  and  the  same  amount  for  granting  letters  of 
administration.  A  State  tax  of  $10  is  levied  upon  the  commissions  of  inferior 
officers  of  cities  and  counties,  such  as  sheriffs,  clerks  of  courts,  health  officers,  etc. 

The  amounts  realized  from  these  sources  in  1898  were  as  follows: 

Tax  on  writs,  wills,  deeds,  etc $146, 787. 40 

Fees  of  county  officers 23,517.33 

Fees  of  State  officers 140,463.76 

Besides  these  revenues  the  State  receives  certain  amounts  from  the  fees  of 
different  State  officers. 

LICENSES. 

Among  the  oldest  sources  of  revenue  in  the  State  of  Pennsylvania  are  licenses 
on  various  classes  of  business. 

MERCANTILE   LICENSES. 

All  persons  engaged  in  mercantile  business  are  required  to  pay  annually,  for 
the  use  of  the  Commonwealth,  amounts  varying,  according  to  the  annual  sales, 
from  a  tax  of  $7  on  sales  amounting  to  $5,000  to  a  tax  of  $1,000  upon  sales  of 
$4,000,000. 

The  amount  realized  from  this  source  in  1898  was  $536,999.55. 

LIQUOR  LICENSES. 

The  amount  of  State  tax  derived  from  various  liquor  licenses  in  1898  was  as 
follows: 

Retail  liquor  licenses $531,029.46 

Wholesale  liquor  licenses 458, 738. 12 

Brewers'  licenses •_ 162, 61 1 . 31 

Bottlers'  licenses 158, 752. 01 


Total.... -  1,311,130.90 

OTHER  LICENSE   FEES. 

State  license  taxes  obtained  from  other  sources  in  1898,  viz.,  billiard,  brokers', 
auctioneers',  peddlers',  theater,  circus,  etc.,  and  eating-house  licenses,  amounted  to 
$120,651.90. 


TAXATION    IN    PENNSYLVANIA.  67; 

STATE  TAXATION. 

The  principal  taxes  received  by  the  Commonwealth  of  Pennsylvania  for  the 
year  1898  may  be  summarized  as  follows: 

1.  From  financial  corporations: 

National  banks $494, 712. 44 

Incorporated  State  banks 66,730.83 

Incorporated  savings  institutions _  _ 36, 624. 19 

Trust  companies 362, 1 54. 30 

Total..  960,221.76 


2.  From  corporations  in  general: 

Foreign  insurance  companies.- 620,922.08 

Tax  on  capital  stock. 3,014,465.24 

Tax  on  loans 824,555.75 

Tax  on  gross  receipts 691, 522. 99 

Tax  on  gross  premiums 38, 698. 01 

Bonus  on  charters ,_ -.... 438, 579. 71 


Total .-• 5,646,743.78 


From  or  through  counties: 

Tax  on  personal  property 2, 722, 245. 58 

Tax  on  writs,  wills,  deeds,  etc.. 146,787.40 

Tax  on  collateral  inheritances 834, 855. 96 

Tax  on  direct  inheritances 3, 811 . 85 

Tax  on  loans  (municipal  and  county) 339, 134. 40 

Receipts  from  licenses 2,051,445.13 


Total 6,098,280.32 


4.  From  other  sources: 

Tax  on  net  earnings  or  income  (brokers,  etc. ) _ 44, 333. 35 

Tax  on  sale  of  fertilizers. 13,490.00 

Total 57,823.35 

MERITS  OF  THE  SYSTEM. 

Mr.  Eastman  enumerates  what  he  regards  as  the  principal  merits  of  the  system 
of  taxation  in  Pennsylvania  as  follows: 

1.  The  separation  of  the  local  system,  in  subjects  and  administration,  from  the 
State  system. 

2.  The  uniformity  resulting  from  taxation  of  corporations  through  State  offi- 
cers, whence  it  results  that  companies  of  the  same  class  are  taxed  precisely  alike 
in  all  sections  of  the  Commonwealth,  except  upon  their  real  estate,  which  is  taxed 
locally. 

3.  The  resulting  inability  of  communities  to  harass  corporations  in  the  taxation 
thereof,  and  on  the  other  hand  the  impossibility  of  large  corporations  obtaining 
exemptions  to  any  extent  from  taxation  by  bribery  or  other  similar  means. 

4.  Simplicity  and  effectiveness  in  taxing  all  that  a  corporation  has  by  assessing 
its  capital  stock  at  its  real  value,  or  rather  at  what  its  value  would  be  but  for  its 
indebtedness. 

5.  The  taxing  of  corporations  on  the  basis  of  sworn  reports  required  to  be  made 
by  their  officers,  the  accounting  officers  having  the  power  to  compel  the  appear- 
ance of  company  officers  before  them  with  their  books  and  papers  whenever  they 
need  more  information  than  the  reports  of  the  company  afford. 

6.  The  requiring  of  sworn  returns  of  personal  property,  with  the  system  of 
checks  thereon  before  mentioned.    A  taxpayer  in  Pennsylvania  can  not  get  rid 
of  taxation  on  his  personal  property  by  swearing  to  a  conclusion  of  law. 

7.  Finally,  the  fact  that  the  consideration  of  practically  all  questions  arising 
concerning  the  taxation  of  corporations  is  by  law  intrusted  to  one  court — the 
court  of  common  pleas  of  Dauphin  County — whose  jurisdiction  as  to  such  question 
extends  throughout  the  State,  with  an  appeal,  of  course,  to  the  supreme  court. 
The  judges  of  the  first-named  tribunal  have  uniformly  been  men  of  ability,  and 
by  having  constantly  to  deal  with  tax  questions  they  have  become  deeply  learned 
in  the  tax  laws,  so  that  their  decisions  have  been  generally  consistent  and  uniform. 


68 


INDUSTRIAL    COMMISSION. 


RECAPITULATION  OF  THE  STATE  TAXES  ON  CORPORATIONS. 

Bonus  on  charters. — This  source  of  revenue  is  not  strictly  a  tax,  but  the  price 
or  consideration  paid  for  the  charter  privileges.  It  is  now  one-quarter  of  1  per 
cent  upon  the  amount  of  authorized  capital  of  the  corporation,  or  any  subsequent 
increase,  payable  in  two  installments,  one  at  the  time  the  charter  is  granted  and 
the  other  within  one  year  thereafter.  The  revenue  from  this  source  amounted 
during  the  fiscal  year  1899  to  $780,626. 

Tax  on  capital  stock. — A  tax  is  assessed  upon  the  actual  value  in  cash  of  the 
capital  stock  of  corporations  at  the  rate  of  5  mills  upon  the  dollar,  with  the  excep- 
tions noted.  The  amount  collected  in  1899  from  capital  stock  (exclusive  of  banks) 
was  $4,575,511. 

Tax  on  gross  receipts. — A  tax  is  imposed  upon  the  gross  receipts  of  transpor- 
tation, telegraph,  telephone,  and  electric-light  companies,  derived  from  business 
done  wholly  within  the  State,  the  rate  being  8  mills  upon  each  dollar  of  such 
receipts.  The  tax  from  this  source  amounted  in  1899  to  $748.214. 

Tax  on  gross  premiums. — This  tax  is  imposed  upon  the  gross  premiums  of 
domestic  insurance  companies,  derived  from  business  done  within  the  State,  at  the 
rate  of  8  mills  upon  the  dollar.  The  receipts  from  this  source  amounted  in  1899 
to  $61 ,882. 

Tax  on  corporate  loans. — This  tax  is  imposed  upon  the  interest-bearing  loans  or 
indebtedness  of  corporations,  and  is  collected  from  the  holder  of  the  indebtedness 
by  the  treasurer  of  the  corporation,  who  is  required  by  law,  as  the  agent  of  the 
State,  to  deduct  the  tax  when  paying  interest  to  resident  and  taxable  holders. 
The  tax  is  at  the  rate  of  4  mills  upon  the  nominal  or  par  value  of  the  loan  or 
indebtedness,  and  the  amount  collected  from  this  source  in  1899  was  ,$1,149,409. 

Tax  on  bank  slock. — This  is  imposed  upon  the  shares  of  bank  stock  at  the  rate  of 
4  mills  upon  its  actual  value,  and  is  collected  from  the  shareholders  of  the  bank. 
The  amount  derived  from  this  source  in  1899  was  $548,800. 

Tax  on  net  earnings  or  income. — This  tax  is  imposed  at  the  rate  of  3  per  cent 
upon  the  net  earnings  or  income  of  incorporated  State  banks  and  savings  institu- 
tions without  capital  stock.  The  revenue  from  this  source  in  1899  amounted  to 
$83,337.40. 

(Bankers  and  brokers  are  required  to  pay  a  tax  of  3  per  cent  upon  net  earnings 
or  income,  and  the  amount  is  included  above.) 

Tax  on  foreign  insurance  companies. — This  tax  is  imposed  upon  the  business  of 
foreign  insurance  companies  done  in  Pennsylvania,  at  the  rate  of  3  per  cent  of 
the  gross  premiums,  and  is  collected  through  the  commissioner  of  insurance. 
The  revenue  derived  from  this  source  in  1899  was  $646,775. 

Classified  statement  showing  amounts  paid  into  the  State  treasury  by  the  several 
classes  of  corporations  named  for  the  fiscal  year  1898. 


Class  of  corporations. 

Tax  on  capi- 
tal stock. 

Tax  on 

loans. 

Tax  on 
gross  re- 
ceipts. 

Tax  on 
gross  pre- 
miums. 

1 

National  banks 

0 

State  banks 

^ 

Trust  companies 

$314,  179.  04 

$23,761.13 

$16,  880.  79 

4 

Incorporated    savings    institutions    (without 

K 

Brewing  companies 

63  647.58 

7,  906.  05 

6 

Brick  clay  slate  stone  and  quarrv  companies 

6  444  36 

2  098  68 

7 

Bridge  and  turnpike  companies 

29,  297.  82 

17,  380.  60 

8 

Coal  coke  and  coal-mining  companies 

287  361  55 

74  415  06 

8497.  55 

<) 

197  80 

290  11 

10 

Gas  (artificial  and  natural) 

125,  387.  13 

6,  475.  66 

158.  32 

1  1 

Insurance  companies  (domestic) 

76  229  54 

38,  698.  01 

12 

Insurance  companies  (foreign) 

620,  922.  08 

18 

Land  and  improvement  companies 

60  322  37 

14,  148.  75 

"M 

Light  heat  and  power  companies 

70  841  21 

13  990  09 

4'>  "83  37 

Ti 

138  426  19 

86  258  91 

lf> 

Market  companies 

11  479  06 

3  453  15 

17 

27  288  23 

2  838  31 

"3  76 

IS 

Railroads  (steam) 

974  688.64 

451,617.06 

423,  709.  04 

ii 

Railways  (passenger) 

676  034  93 

74  668  77 

163  591.49 

•>o 

293  386  25 

39  196  45 

36  246  98 

23 

Telephone  and  telegraph  companies 

19'  121  91 

'  460.  49 

24,  586.  39 

22 

Water  companies 

81  374  21 

26  749  88 

132.  91 

28 

72  936  46 

20  898  34 

3  07 



Total  .               

3,  328,  644.  28 

866,  316.  38 

691,  522.  99 

676,  500.  88 

TAXATION    IN    PENNSYLVANIA. 


Classified  statements  showing  amounts  paid  into  the  State  treasury  by  the  several 
classes  of  corporations  named  for  the  fiscal  year  1898 — Continued. 


Class  of  corporations. 

Tax  on 
bank 
stock. 

Tax  on  net 
earnings. 

Bonus  on 
charters. 

Total. 

1 

2 
3 
4 

5 
6 
7 

8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 

National  banks  

$494,712.44 

$494,  712.  44 
66,  730.  83 
362,  154.  30 

36,624.19 
80,462.83 
14,373.54 
46,761.76 
378,  £63.  77 
492.17 
191,449.40 
114,927.55 
620,  922.  08 
78,183.46 
151,253.11 
349,  353.  58 
14,  935.  96 
31,306.63 
1,850,014.74 
934,852.07 
497,  636.  34 
53,  405.  16 
133,  064.  25 
104,  785.  88 

State  banks    

65,  746.  33 

$984.50 
7,  333.  34 

Tru^t  companies 

Incorporated    savings    institutions    (without 
capital  stock  )      

$36,  624.  19 

Brewing  companies 

8,909.20 
5,  830.  50 
83.34 
16,289.61 
4.26 
59,428.29 

Brick,  clay,  slate,  stone,  and  quarry  companies. 
Bridge  and  turnpike  companies 

Coal  coke  and  coal-mining  companies 

Ferries  

Gas  (artificial  and  natural) 

Insurance  companies  (domestic) 

Insurance  companies  (foreign) 

Land  and  improvement  companies 

3,  712.  34 
24,  138.  44 
124,  668.  48 
3.75 
1,156.33 

Light,  heat,  and  power  companies  

Manufacturing  companies 

Oil  and  mining  companies 

Railroad**  (  ^team  ) 

Railways  (  passenger)                          

20,  556.  88 
128,  806.  66 
9,  236.  37 
24,  807.  25 
10,948.01 

Transportation  companies  (miscellaneous) 

Telephone  and  telegraph  companies  

Miscellaneous  companies 

l 

Total  

!  

560,458.77  j     36,624.19 

446,897.55 

6,  606,  966.  04 

Valuation  of  property  taxable  for  local  purposes,  1898. 

Real  estate  taxable $2,685,199,712 

Horses,  mares,  geldings,  and  mules  over  4  years  old 23, 771 , 539 

Neat  cattle  over  4  years  old 11, 915, 317 

Salaries  and  emoluments  of  office,  offices,  posts  of  profit,  profes- 
sions, trades,  and  occupations .'. .        125, 622, 996 

Aggregate  value  of  all  property  taxable  for  local  purposes.  _ .    2, 846, 607, 609 

The  secretary  of  internal  affairs  in  his  report  for  1898  says  in  relation  to  the 
taxation  of  property  for  local  purposes:  "  It  is  probable  that  the  system  of  taxa- 
tion, according  to  the  enactments  of  the  legislature  of  Pennsylvania^  as  equita- 
ble a  one  as  has  yet  been  devised,  and  the  failures  that  are  encountered  and  the 
inequalities  that  exist  are  attributed  in  most  part  to  the  faulty  execution  of  the 
laws  rather  than  to  any  defects  in  the  enactments  themselves.  Therefore  it  fol- 
lows that  the  wrongs  that  exist,  if  such  wrongs  do  exist,  are  due  to  a  failure  on 
the  part  of  the  people  to  execute  with  fidelity  the  duties  imposed  upon  the  officers 
chosen  by  the  people  to  carry  out  the  laws.'' 

Taxes  for  all  purposes,  1898. 

Amount  of  taxes  collected  in  counties  for  all  purposes. $50, 315, 870. 81 

Amount  of  taxes  collected  on  personal  property $3, 427, 385. 63 

Amount  collected  on  occupations,  etc 1 , 934, 982. 05 

Amount  collected  on  licenses 5, 779, 153. 96 

Amount  on  real  estate,  railroad  (locally  assessed)  _  _        757,  593. 48 
Amount  on  real  estate  of  other  corporations 2, 501, 423. 60 


14, 400, 538. 72. 

Balance  on  real  estate  of  individuals : 35, 915, 332. 09 

The  tax  on  occupations,  professions,  etc.,  is  not  generally  enforced,  some  coun- 
ties, among  them  Philadelphia  and  Dauphin,  making  no  returns  whatever. 

More  stringent  legislation  for  the  enforcement  of  this  tax  is  urged  by  officials. 

Assessments  are  made  triennially  under  the  authority  of  the  county  commis- 
sioners of  the  several  counties.  Precepts  are  issued  by  such  commissioners  to-the 
local  assessors,  who  proceed  to  take  an  account,  in  forms  directed  by  law,  of  the 
names  of  all  taxable  inhabitants  of  their  respective  districts,  and  also  an  account 
of  the  following  real  and  personal  property: 

First.  Real  estate,  viz:  All  houses,  lands,  lots  of  ground  of  all  descriptions,  all 
furnaces,  forges,  bloomeries,  distilleries,  sugarhouses,  malt  houses,  breweries, 
tanyards,  and  ferries. 


70  INDUSTRIAL    COMMISSION. 

-  Second.  The  following  personal  property,  viz:  All  horses,  mares,  geldings,  and 
cattle  above  the  age  of  4  years. 

Third.  All  offices  and  posts  of  profit,  professions,  trades,  and  occupations;  also  all 
single  freemen  above  the  age  of  21  years  who  do  not  follow  any  occupation  or  calling. 

Only  the  subjects  of  taxation  thus  enumerated  are  directly  taxable  for  local 
purposes.  The  whole  system  is  under  the  supervision  of  a  State  board  of  review 
commissioners,  consisting  of  the  auditor-general,  State  treasurer,  and  secretary 
of  the  Commonwealth. 

The  cities  of  Philadelphia  and  Pittsburg  have  special  systems  of  their  own  for 
local  taxation  from  like  sources. 

In  conclusion  we  quote  the  f ollowing  from  Eastman  on  Taxation  for  State  Pur- 
poses in  Pennsylvania  as  to  the  attempts  made  in  recent  years  to  change  the  sys- 
tem in  that  State: 

•"At  the  session  of  1887  an  act  was  passed  which  would  have  materially  changed 
the  tax  system  of  the  State,  but  which  failed  to  become  a  law,  as  will  be  remem- 
bered, owing  to  the  failure  of  the  president  pro  tempore  of  the  senate  to  affix  his 
signature  thereto.  A  tax  commission  was  created  by  law  at  the  same  session  of 
the  legislature,  which  reported  a  revenue  bill,  a  principal  feature  of  which  was 
the  substitution  of  a  single  tax  on  corporations  to  take  the  place  of  the  existing 
taxes  thereon  on  capital  stock,  gross  receipts,  and  loans  or  bonded  indebtedness. 
The  legislature  took  no  action  on  the  bill  so  reported,  and  at  the  session  of  1889 
another  tax  commission  was  created. ,  The  members  thereof  failed  to  agree  on 
any  measure  and  made  individual  reports,  suggesting  various  changes  in  methods 
of  taxation,  none  of  which  was  made. 

"At  almost  every  session  of  the  general  assembly  for  the  past  8  or  10  years  per- 
sistent efforts  have  been  made  to  secure  the  passage  of  bills  usually  known  as 

*  granger  bills,'  because  very  generally  supported  by  the  members  of  the  order  of 
Patrons  of  Husbandry,  so  drawn  as  to  effect  sweeping  changes  in  our  tax  legislation. 

"As  a  concession  to  the  supporters  of  these  measures,  the  auditor-general  was 
instructed  by  resolution  of  the  general  assembly  at  the  session  of  1895  to  procure 
from  all  corporations  in  the  State  reports  made  in  the  manner  required  by  the 
tax  bill  then  pending,  and  to  make  feigned  settlements  thereon,  in  order  to  ascer- 
tain whether  the  proposed  measure  would  supply  a  sufficient  amount  of  revenue 
to  meet  the  expenses  of  the  State  government,  or.  in  other  words,  whether  the 
proposed  system  would  produce  an  equal  amount  of  revenue  with  the  old.  Such 
reports  were  to  be  obtained  for  2  consecutive  years.  They  have  already  been 
obtained  for  1  year,  and  have  recently  been  required  for  the  second  year.  It  is 
understood  that  the  statistics  thus  far  obtained  have  failed  to  show  that  the  pro- 
posed measure  would  produce  the  necessary  amount  of  revenue. 

"In  1892  a  Pennsylvania  tax  conference  was  formed  by  the  representatives  of 
various  important  interests  in  the  State,  an  unofficial  but  highly  respectable  body, 
owing  to  the  talents  and  earnestness  of  the  members  thereof.  The  object  of  the 
commission  was  to  supply  statistics  upon  which  discussions  of  proposed  changes 
of  taxation  might  be  based.  It  has  been  mainly  owing  to  the  lack  of  such  data 
that  former  attempts  to  agree  upon  a  revision  of  the  tax  laws  have  failed.  Two 
preliminary  reports  were  made  by  this  conference,  one  containing  much  valuable 
information  relative  to  objects  of  taxation  in  Pennsylvania,  and  the  other  giving 
a  comparative  statement  of  the  tax  systems  of  all  other  States.  The  commission 
finally  reported  the  revenue  bill  introduced  at  the  session  of  1895,  above  referred 
to,  data  concerning  the  operations  of  which,  if  it  becomes  a  law,  are  yet  being 
procured.  Owing  to  the  death  of  Joseph  D.  Weeks,  of  Pittsburg.  the  chairman 
of  the  conference,  its  operations  have  of  late  languished,  if  indeed  its  organiza- 
tion may  not  be  considered  as  practically  dissolved. 

"In  closing  this  sketch  it  may  be  said  that,  while  the  State  tax  system  of 
Pennsylvania  can  doubtless  be  improved  in  many  respects,  the  system  itself  is  a 
very  excellent  one.  The  burdens  of  taxation  for  State  purposes  are  almost  wholly 
placed  upon  corporations,  leaving  individual  taxables  subject  to  taxation  for 
local  purposes  only,  except  that  the  mortgages,  bonds,  and  other  classes  of  per- 
sonal property  taxable  under  the  laws  of  the  State  held  by  them  pay  a  State  tax, 
but  three-fourths  of  even  this  tax  is  returned  to  the  counties  to  relieve  the  bur- 
dens of  local  taxation. 

"The  State  tax  laws  of  Pennsylvania  are  not  only  in  the  main  just,  but  they 
have  been  so  thoroughly  construed  by  hundreds  of  decisions  of  the  courts  that 
but  little  opportunity  exists  for  disputing  over  the  proper  interpretation  thereof. 

"  Before  wholly  abandoning  a  system  so  long  established,  so  thoroughly  inter- 
preted, and  so  generally  equitable,  for  the  purpose  of  adopting  any  untried  sys- 
tem devised  by  theorists,  every  feature  of  which  must  be  construed  by  the  courts, 
it  is  believed  that  thoughtful  men  will  require  nothing  short  of  'an  absolute 
demonstration  that  the  proposed  system  will  prove  in  all  important  respects  the 
superior  of  the  old." 


OHIO. 

The  power  of  the  legislature  in  this  State  over  taxation  under  the  constitution, 
as  determined  by  the  decisions  of  the  supreme  court,  is  thus  defined  by  the  Ohio 
tax  commission  of  1893: 

"  First.  The  constitution  prohibits  the  taxation  of  persons. 

"  Second.  As  to  property:  (a)  It  must  be  taxed  for  general  revenue  and  by  a  uni- 
form rule,  according  to  its  true  value  in  money;  (b)  it  may  be  taxed  by  assess- 
ment for  special  benefits  derived  by  it  from  public  improvements. 

' '  Third.  Business,  which  includes  all  subjects  of  taxation  other  than  persons  and 
property,  may  be  taxed  either  for  general  revenue  or  for  the  purposes  of  regula- 
tion, in  such  mode  and  manner  as  the  legislature  in  its  discretion  may  determine." 

GENERAL  PROPERTY  TAX. 

To  these  excessive  limitations  upon  the  legislative  power,  imposed  by  the  con- 
stitution of  the  State,  appears  to  be  due,  to  some  extent  at  least,  the  retention  of 
the  general  property  tax  system,  which,  "in  principle,  is  a  survival  of  the  economic 
conditions  of  the  early  part  of  the  century,"  and  the  most  vigorous  efforts  to  sub- 
ject property  to  taxation  by  means  of  one  uniform  tax  on  all  classes. 

The  general  property  tax  still  constitutes  the  principal  source  of  revenue  for 
State  as  well  as  local  purposes,  and  Ohio  has  adopted  the  most  rigorous  and  drastic 
methods  devised  in  any  State  for  bringing  upon  the  tax  rolls  all  classes  of  prop- 
erty, real  and  personal. 

During  recent  years  efforts  have  also  been  made  through  special  legislative  enact- 
ments, without  pursuing  any  uniform  or  definite  plan,  to  supplement  the  general 
property  tax  system  and  bring  it  more  in  harmony  with  modern  economic  condi- 
tions. In  consequence  of  such  desultory  efforts  we  find  in  this  State  the  general 
property  tax  "  side  by  side  with  the  gross-receipts  tax.  the  excise  tax,  and  assess- 
ment by  the  unit  rule  obtained  from  the  stock,  bonds,  and  earnings,  and  others,  all 
imposed  on  corporations  essentially  alike  in  character  and  differing  only  in  name." 

The  legislature  seems  to  have  been  inclined  to  resort  to  any  expedient  within 
constitutional  restrictions  which  promised  to  bring  about  improvement  in  the 
antiquated  system  of  the  State,  and  we  find  corporations  substantially  alike  in 
character  taxed  by  6  distinct  methods,  which  will  be  described  hereafter. 

THE   LEVY. 

The  amount  of  taxation  necessary  to  be  levied  annually  for  State  purposes  is 
determined  by  the  legislature,  for  county  purposes  by  the  county  commissioners, 
for  township  purposes  by  township  trustees,  for  school  purposes  by  the  boards  of 
education,  for  municipal  corporations  by  the  city  councils.  Each  of  these  bodies 
reports  its  estimates  to  the  county  auditor,  who  levies  the  taxes  upon  the  valu- 
ation as  reported  to  him  by  the  various  boards  of  equalization. 

ASSESSMENT. 

One  assessor  is  annually  elected  in  each  ward  and  township  to  list  and  return 
personal  property.  His  labor  is  supplemented  by  the  county  auditor  and  the 
annual  city  and  county  boards  of  equalization. 

Other  assessing  officers  and  boards  are  the  county  auditors;  the  board  of 
appraisers  and  assessors  for  express,  telegraph,  and  telephone  companies,  com- 
posed of  the  State  auditor.  State  treasurer,  and  the  attorney-general;  the  annual 
State  board  of  equalization  for  banks,  composed  of  the  governor,  the  attorney- 
general,  and  the  State  auditor:  the  annual  State  board  of  equalization  for  railroads, 
composed  of  the  State  auditor,  the  attorney-general,  and  the  State  treasurer;  the 
decennial  city,  county,  and  State  boards  of  equalization  for  real  estate. 

71 


72  INDUSTRIAL    COMMISSION. 

All  property  in  the  State,  whether  real  or  personal,  and  whether  belonging  to 
individuals  or  corporations,  and  all  moneys,  credits,  investments  in  bonds,  stocks, 
or  otherwise,  of  persons  residing  in  the  State,  are  declared  to  be  subject  to  tax- 
ation, except  only  such  as  may  be  expressly  exempted. 

EXEMPTIONS. 

Tender  the  provisions  of  the  constitution  the  legislature  has  granted  exemptions 
to  public-school  property,  all  property  of  public  colleges  not  used  with  a  view 
to  profit,  cemeteries,  State  and  Federal  property,  county  buildings,  houses 
used  exclusively  for  public  worship,  poorhouses,  buildings  belonging  to  institu- 
tions of  purely  public  charity  together  with  the  land  occupied  by  such  institutions 
not  used  with  a  view  to  profit,  property  used  for  extinguishing  fires,  public  prop- 
erty used  for  public  purposes  exclusively,  personal  property  to  an  amount  not 
exceeding  $100,  etc. 

REAL  ESTATE. 

Real  estate  is  defined  to  include  not  only  land,  but  all  buildings,  structures,  and 
improvements  and  fixtures  of  every  kind  thereon,  and  all  rights  and  privileges 
belonging  thereto  unless  otherwise  specified,  to  be  assessed  where  located  "  accord- 
ing to  its  true  value  in  money." 

Real  estate  is  assessed  decennially  by  assessors  elected  by  the  people  for  the 
various  assessment  districts,  which  are  coequal  with  the  number  of  wards  and 
townships  within  the  county,  each  assessor  assessing  the  real  property  within  his 
district. 

The  action  of  the  assessors  is  reviewed  by  the  city  and  county  decennial  boards 
of  equalization  for  real  estate,  and  their  action  in  turn  is  reviewed  by  the  decen- 
nial State  board  of  equalization  for  real  estate.  Changes  in  valuations  and  errors 
in  the  valuation  of  real  estate  are  reported  by  the  annual  assessor  of  personal 
property,  and  changes  in  valuation  and  errors  are  corrected  and  equalized  by  the 
annual  city  and  county  boards  of  equalization. 

PERSONAL  PROPERTY. 

Personal  property  of  all  kinds,  tangible  and  intangible,  is  by  law  subject  to 
taxation,  almost  without  exemption. 

Apparently  to  avoid  misunderstanding  and  escape  from  the  duplicate,  such 
property  is  defined  with  great  minuteness  of  detail. 

The  statute  provides  that  the  term  "  investment  in  bonds  "  includes  all  moneys 
in  bonds  or  certificates  of  indebtedness  or  other  evidences  of  indebtedness  of 
whatever  kind,  whether  issued  by  domestic,  public,  or  municipal  corporations,  or 
by  the  United  States,  held  by  persons  residing  in  Ohio,  whether  for  themselves  or 
others.  The  term  "investment  in  stocks  "  includes  all  moneys  invested  in  the 
capital  stock  of  any  company,  for  the  taxation  of  which  no  special  provision  is 
made  by  law,  held  by  persons  residing  in  the  State,  either  for  themselves  or  oth- 
ers. The  term  "  personal  property  "  includes,  first,  every  tangible  thing,  being 
the  subject  of  ownership,  whether  animate  or  inanimate,  other  than  money,  not 
forming  any  part  of  real  property;  second,  the  capital  stock,  undivided  profits, 
and  all  other  means  not  forming  part  of  the  capital  stock  of  every  company,  and 
every  share,  portion,  or  interest  in  such  stock,  profits,  or  means,  by  whatsoever 
name  the  same  may  be  designated;  third,  the  money  loaned  on  pledge  or  mort- 
gage of  real  estate,  although  a  deed  or  other  instrument  may  be  given  for  the 
same,  if  between  the  parties  the  same  is  considered  as  security  merely.  The  term 
"  money  "  includes  any  surplus  or  undivided  profits  held  by  societies  for  saving,  or 
banks  having  no  capital  stock,  gold  or  silver  coin,  bank  notes  of  solvent  banks  in 
actual  possession,  and  every  deposit  which  the  person  o wring,  holding  in  trust, 
or  having  the  beneficial  interest  therein  is  entitled  to  withdraw  in  money  on 
demand.  The  term  "  credits  "  means  the  excess  of  the  sum  of  all  legal  claims 
and  demands,  whether  for  money  or  other  valuable  thing,  due  or  to  become  due, 
including  deposits  in  banks  or  with  persons  within  or  out  of  this  State,  other  than 
such  as  are  held  to  be  money,  when  added  together  (estimating  every  such  claim 
or  demand  at  its  true  value  in  money) ,  over  and  above  the  sum  of  legal  bona  fide 
debts  owing  by  the  owner;  but  in  making  up  the  sum  of  such  debts  owing, 
there  shall  be  taken  into  account  no  obligation  to  any  mutual  insurance  company, 
nor  any  unpaid  subscription  to  the  capital  stock  of  any  joint  stock  company,  nor 
any  subscription  for  any  religious,  scientific,  literary,  or  charitable  purpose;  nor 
any  acknowledgment  of  any  undebtedness,  unless  founded  upon  some  consideration 
actually  received  and  believed  at  the  time  of  making  such  acknowledgment  to  be 


TAXATION    IN    OHIO.  73 

a  full  consideration  therefor:  nor  any  acknowledgment  made  for  the  purpose  of 
diminishing  the  amount  of  credits  to  be  listed  for  taxation ;  nor  any  greater  amount 
or  portion  of  any  liability  as  surety  than  the  person  required  to  make  the  state- 
ment of  sucti  credits  believes  that  such  surety  is  in  equity  bound  and  will  be  com- 
pelled to  pay  or  to  contribute  in  case  there  be  no  securities. 

LISTING  SYSTEM. 

Every  person  "  of  full  age  and  sound  mind  "  is  required  to  make  out  and  deliver 
to  the  assessor  a  detailed  statement  of  all  personal  property  owned  by  him  or  in 
his  possession  or  control,  and  verify  the  same  by  oath;  and  the  assessor  is  required 
to  demand  such  sworn  statements. 

Any  person  who.  being  called  upon  to  list  property  for  taxation  and  claiming 
to  have  none,  either  on  his  own  account  or  for  others,  subject  to  taxation,  is  required 
to  make  oath  to  the  truth  of  his  claim  in  that  regard. 

Such  statement  is  required  to  set  forth  truly  and  distinctly  in  number,  detail, 
and  value  thereof,  various  kinds  of  chattels  and  the  value  of  all  articles  of  personal 
property  not  included  in  any  special  class;  the  average  value  of  the  goods  and 
merchandise  which  such  person  is  required  to  list  as  a  merchant;  the  value  of 
property  which  he  is  required  to  list  as  a  banker,  broker,  or  stock  jobber:  the 
average  value  of  materials  or  manufactured  articles  which  he  is  required  to  list 
as  a  manufacturer;  moneys  on  hand  or  on  deposit  subject  to  order;  the  amount 
of  credits  as  above  defined;  the  amount  of  all  moneys  invested  in  bonds,  stocks, 
joint  stock  companies,  or  otherwise;  the  monthly  average  amount  or  value  for 
the  time  he  held  or  controlled  the  same  within  the  preceding  year  of  all  moneys, 
credits,  or  other  effects  invested  in  or  converted  into  securities  of  the  United 
States  or  of  the  State:  and  any  indebtedness  created  in  the  purchase  of  such 
securities  can  not  be  deducted  from  credits. 

Every  person  who  may  hold  any  property  belonging  to  others  is  required  to  list 
the  same  separately  from  his  own  and  in  like  manner,  specifying  the  name  of 
the  person,  estate,  company,  or  corporation  to  whom  it  belongs. 

Deposits  with  banks  or  persons  subject  to  draft  on  demand  are  taxable  as  money; 
if  payable  on  time  they  are  taxable  as  credits. 

These  provisions  apply  to  all  b'onds  and  other  evidences  of  indebtedness  of  any 
city,  county,  town,  railroad,  telegraph,  express,  or  other  company,  and  the  stock  of 
any  corporation  whether  in  or  out  of  the  State,  and  notwithstanding  the  capital 
of  the  corporation  is  taxed  in  the  State  where  it  is  located. 

Money  or  credits  as  defined  must  be  listed  wherever  the  same  maybe,  and  debts 
can  only  be  deducted  from  credits. 

Shares  of  stock  in  banks,  railroads,  and  other  companies  in  Ohio  specifically 
provided  for  are  omitted  from  returns  of  holders,  because  the  returns  of  the  offi- 
cers of  such  companies  embrace  both  capital  and  means. 

Specific  rules  are  prescribed  for  the  valuation  of  personal  property,  the  general 
rule  being  -k  at  the  usual  selling  price  thereof." 

Investments  are  to  be  valued  at  the  true  value  thereof  in  money;  deposits  at  the 
full  amount;  credits  for  certain  sums  payable  in  money,  property,  or  labor  at  the 
full  amount:  annuities  or  moneys  receivable  at  stated  periods  at  the  sum  which 
they  are  believed  to  be  worth  at  the  time  of  listing. 

Severe  penalties  are  imposed  by  law  upon  assessing  officers  for  the  violation  of 
rules  for  valuing  personal  property. 

If  any  party  required  to  list  neglects  or  refuses  to  list  or  swear  to  the  state- 
ment the  assessor  must  note  such  fact  and  make  the  return  from  the  best  informa- 
tion he  can  obtain,  whereupon  the  auditor  is  required  to  add  50  per  cent  to  the 
amount  returned,  and  the  amount  so  increased  becomes  the  basis  of  taxation. 

The  manner  in  which  the  stock  and  property  of  merchants  and  manufacturers 
shall  be  listed  and  the  kinds  of  property  that  shall  be  included  are  minutely 
defined. 

Shares  of  stock  in  building  and  loan  associations  upon  which  no  loans  have 
been  made  are  regarded  as  credits  and  the  holders  required  to  list  them  for  taxa- 
tion at  their  true  value  in  money. 

The  law  particularly  specifies  what  the  oath  administered  to  the  party  listing 
property  shall  contain.  It  is  comprehensive  and  "ironclad,"  and  includes 
everything  that  might  possibly  disclose  any  evasion  or  deception. 

If  any  person  required  to  list  property  for  taxes  shall  in  any  year  or  years  make 
a  false  return  or  evade  a  return,  the  county  auditor  is  required  to  ascertain  as 
nearly  as  practicable  the  true  amount  of  personal  property  omitted  during  such 
years  and  add  50  per  cent  thereof,  and  taxes  are  to  be  collected  on  the  sum  so 
obtained. 


74  INDUSTRIAL    COMMISSION. 

In  case  the  county  auditor  has  reason  to  believe  or  is  informed  that  any  person 
has  made  to  the  assessor  a  false  statement,  or  that  the  assessor  has  not  returned 
the  full  amount  required  to  be  listed  or  has  omitted  or  made  erroneous  return  of 
any  property,  he  is  required  to  proceed  to  correct  such  return,  and  empowered  to 
summon  and  examine  witnesses,  the  party  found  to  have  made  such  false  state- 
ment being  liable  for  the  costs  of  the  proceedings. 

It  will  thus  be  seen  that  in  this  State  the  laws  provide  for  the  most  careful  listing 
by  individual  statement  under  oath  and  under  pain  of  heavy  penalties,  the  most 
inquisitorial  examination  into  private  affairs,  and  they  have  even  gone  so  far  as 
to  authorize  the  employment  by  county  commissioners  of  persons  to  give  informa- 
tion concerning  the  property  of  individuals,  which  would  result  in  the  personal 
property  being  placed  upon  the  tax  rolls.  These  persons  are  termed  inquisitors, 
and  in  some  counties  such  tax  inquisitors  have  been  allowed  and  paid  25  per  cent 
of  the  taxes  collected  through  such  information.  Yet,  notwithstanding  these 
efforts,  the  results,  so  far  as  getting  personal  property,  tangible  and  intangible, 
upon  the  rolls  is  concerned,  are  not  much  more  satisfactory  than  in  other  States, 
and  there  appears  to  be  an  increasing  disposition  to  employ  other  methods  to  a 
greater  extent  in  reaching  personal  property  substantially  of  a  corporate  character. 

Referring  to  this  subject,  the  governor  of  the  State,  in  his  special  message,  says 
that  personal  property  is  valued  all  the  way  from  full  value  down  to  nothing:  in 
fact,  the  great  majority  of  the  personal  property  of  the  State  is  not  returned,  but 
entirely  and  fraudulently  withheld  from  taxation.  So  far  as  personal  property 
is  concerned,  the  fraud  is  with  the  people  who  list  their  property  for  taxation. 
The  idea  seems  largely  to  prevail  that  there  is  inequality  in  taxation,  and  that 
there  is  no  harm  in  cheating  the  State,  although  to  do  so  a  fraudulent  return 
must  be  made  and  perjury  committed.  This  offense  against  the  State  and  good 
morals  is  too  frequently  committed  by  men  of  wealth  and  high  character  and 
corresponding  position  in  society. 

Dr.  Ely,  after  investigating  this  system  and  conversing  with  many  of  the  prom- 
inent men  of  the  State,  says  that  "  nobody  claimed  that  more  than  a  compara- 
tively small  fraction  or  part  of  personal  property  was  reached  in  the  larger  cities, 
while  it  was  generally  if  not  unanimously  held  that  the  larger  the  city  the  smaller 
the  proportion  of  the  personalty  reached — as  indeed  always  happens." 

He  refers  to  the  statement  of  a  prominent  lawyer  in  that  State  who  holds  estates 
in  trust  for  several  parties,  that  whenever  he  goes  to  the  tax  office  he  feels  capable 
of  committing  robbery,  arson,  and  murder,  because  he  is  compelled  to  pay  taxes 
on  estates  of  $2,000,  $3,000,  and  $4.000  belonging  to  little  orphan  children,  whereas 
he  sees  wealthy  clients  paying  on  10  or  15  per  cent  of  what  he  knows  they  are 
worth. 

Dr.  Ely,  in  conversation  with  a  gentleman,  once  an  official,  who  had  had 
long  service  in  the  tax  departments  of  Ohio,  said:  "  It  seems  to  me  from  what 
you  say  there  is  not  a  wealthy  man  in  the  State  of  Ohio  who  is  not  a  perjurer." 
He  replied,  "  It  is  true." 

The  tax  commission,  in  its  report  of  1893,  after  thorough  investigation  and  sta- 
tistical demonstration  of  the  results  of  these  methods  in  the  taxation  of  personal 
property,  concludes  that  they  are  productive  of  very  gross  injustice  and  inequality; 
that  while  fully  one-half  of  the  property  exists  in  Intangible  form,  of  this  all  but 
a  mere  bagatelle  escapes  taxation  entirely.  The  commission  is  very  severe  in 
condemnation  of  the  system  and  its  results  in  this  respect. 

Mr.  Frederic  C.  Howe,  of  the  Cleveland  bar,  formerly  secretary  of  the  Pennsyl- 
vania tax  conference,  in  a  pamphlet  upon  Taxation  of  Quasi-public  Corporations 
in  Ohio,  says: 

"  Personal  property,  while  by  law  subject  to  taxation  almost  without  exemp- 
tion, and  with  the  most  stringent  measures  enacted  to  secure  its  assessment,  is 
seldom  returned  save  in  the  rural  districts,  where  it  can  not  escape  the  assessor's 
notice.  Every  conceivable  device  of  the  legislator  to  get  personal  property  on  the 
duplicate  has  failed  here  as  elsewhere,  and  realty  can  hope  for  but  little  relief  from 
this  source." 

The  rigid  inquisitorial  system  is  frequently  pointed  to  by  tax  commissions  and 
officials  of  other  States  as  a  practical  success  in  reaching  personal  property.  The 
Ohio  tax  commission  of  1893,  however,  after  careful  investigations,  shows  that 
this  system  does  not  succeed  in  getting  upon  the  tax  duplicates  any  appreciable 
part  of  the  personal  property  which  is  not  tangible  and  not  in  sight;  that  while 
in  country  counties,  where  the  assessor  is  personally  acquainted  with  the  circum- 
stances of  the  taxpayer,  it  is  in  a  measure  successful,  in  the  city  counties  it  is  an 
utter  failure. 

The  commission  states,  as  a  result  of  a  thorough  discussion  of  the  subject,  that 
fully  one-half  of  the  property  of  a  modern  State  exists  in  intangible  forms,  and  of 
this  all  but  a  mere  bagatelle  escapes  entirely  when  the  attempt  is  made  to  reach 
it  in  the  form  of  property. 


OHIO    CORPORATION    TAXES.  75 

CORPORATIONS  IN  GENERAL. 

All  corporations,  except  telegraph,  telephone,  express,  and  railroad  companies, 
and  such  others  as  are  otherwise  specially  provided  for,  are  required  to  list,  under 
oath,  and  return  to  the  auditors  of  the  several  counties  in  which  such  property  is 
situated,  all  their  personal  property,  including  moneys  and  credits  of  such  com- 
panies within  the  State,  and  also  the  real  estate  necessary  to  their  daily  operations, 
at  the  actual  value  in  money;  together  with  a  statement  of  the  amount  of  such 
property  situated  in  each  ward,  City,  village,  or  township  therein. 

The  value  of  all  movable  property  is  thereupon  added  to  the  stationary  and  fixed 
property  and  real  estate,  and  apportioned  to  such  wards,  cities,  villages,  or  town- 
ships pro  rata,  in  proportion  to  the  value  of  the  real  estate  and  the  fixed  property 
therein,  and  all  property  so  listed  and  apportioned  is  subject  to  and  pays  the  same 
taxes  as  other  like  property  in  such  cities,  villages,  wards,  or  townships. 

Such  corporations  are  also  required  to  return  to  the  State  auditor  the  aggregate 
amount  of  property  listed  in  the  several  counties.  If,  in  the  opinion  of  the  county 
auditor,  such  report  is  incorrect,  he  is  authorized  to  correct  it. 

The  county  board  of  equalization  and  the  State  board  of  equalization  convene 
annually,  and  the  county  auditor  is  required  to  lay  before  these  boards,  for  the 
territory  they  respectively  have  jurisdiction  over,  the  returns  of  the  assessors, 
together  with  the  returns  made  to  him  by  corporations. 

These  boards  have  power  to  hear  complaints,  and  may  equalize  the  valuations 
of  all  real  and  personal  property,  adding  to  or  deducting  from  the  valuation 
thereof  upon  such  evidence  as  shall  be  satisfactory  to  them. 

BANKS. 

Unincorporated  banks  are  required  to  file  annually  with  the  county  auditor  a 
statement,  under  oath,  showing — 

First.  Average  amount  of  notes  and  bills  receivable  discounted  or  purchased  in 
the  course  of  business. 

Second.  The  average  amount  of  accounts  receivable. 

Third.  The  average  amount  of  cash  and  cash  items  in  possession  or  transit. 

Fourth.  The  average  amount  of  stocks,  bonds,  including  United  States  Govern- 
ment bonds,  or  evidences  of  indebtedness  held  as  an  investment  or  in  any  way 
representing  assets. 

Fifth.  The  amount  of  real  estate  at  its  assessed  value. 

Sixth.  The  average  amount  of  deposits. 

Seventh.  The  average  amount  of  accounts  payable,  exclusive  of  current  deposit 
accounts. 

Eighth.  The  average  amount  of  United  States  Government  and  other  securities 
exempt  from  taxation. 

Ninth.  True  value  of  furniture  and  other  property. 

From  the  aggregate  amount  of  the  first  5  items  is  deducted  the  aggregate 
amount  of  items  5, 6,  7,  and  8,  and  the  remainder  added  to  the  ninth  item  becomes 
the  basis  for  taxation,  and  subject  to  the  same  rate  as  other  personal  property. 
These  provisions  apply  also  to  incorporated  savings  banks. 

INCORPORATED  BANKS. 

All  the  shares  of  the  stockholders  in  any  incorporated  bank  located  in  the  State 
are  listed  at  their  true  value  in  money  and  taxed  in  the  city,  ward,  or  village 
where  such  bank  is  located  at  the  same  rates  as  other"  property  taxed  locally. 
The  real  estate  of  any  such  bank  is  taxed  where  located. 

The  cashier  of  each  incorporated  bank  is  required  to  return  to  the  county  audi- 
tor a  true  statement,  under  oath,  exhibiting  in  detail  and  under  appropriate 
heads  the  resources  and  liabilities  of  such  bank  on  the  Wednesday  next  preceding 
the  second  Monday  in  May,  together  with  the  name  and  residence  of  each  stock- 
holder and  the  number  of  shares  held  by  each. 

Upon  receiving  such  report  the  auditor  fixes  the  total  value  of  the  shares  of  such 
bank  according  to  their  true  value  in  money  and  deducts  therefrom  the  value  of 
the  real  estate  as  shown  by  such  report. 

Such  reports  and  valuations  are  thereupon  passed  upon  and  equalized  by  the 
State  board  of  equalization  for  banks,  composed  of  the  governor,  State  auditor, 
and  attorney-general. 


76  INDUSTRIAL    COMMISSION. 

Valuations,  1899. 

Valuation  of  real  estate  in  Ohio  in  1899  . .                                     .  $1 , 256. 524, 809. 00 
Valuation  of  personalty 530,034,260.00 


Total... 1.786,559,069.00 

^The  amount  of  taxes  raised  in  1899  was  as  follows: 

State  tax $5,071,800.31 

County  and  local  purposes 37,864,845.06 


Totaltax 42,936,645.37 

The  classification  of  valuations  of  various  kinds  of  personal  property,  as  equal- 
ized by  local  boards,  is  shown  by  the  following  table  from  the  report  of  the  auditor 
of  State  for  1899: 

Horses $27, 283, 936. 00 

Cattle 24,802,704.00 

Mules,  etc ..... 494,346.00 

Sheep 6, 753, 401 . 00 

Hogs 4,972,424.00 

Carriages 4, 229, 946. 00 

All  other  personal  property  subject  to  taxation  and  not  included 

in  any  of  the  foregoing  or  subsequent  items  of  this  statement. _  37, 033, 250. 00 

Watches 1 , 320, 0 1 9 . 00 

Pianos  and  organs 1 4, 680, 475 . 00 

Mining  stock 37,318,721.00 

Value  required  to  be  listed  as  banker,  broker,  or  stock  jobber 753, 817. 00 

Manufacturers'  stock,  etc 15, 439, 263. 00 

Value  of  all  moneys  in  possession  or  on  deposit  subject  to  order  . .  41, 102, 825. 00 

Value  of  all  credits  after  deducting  all  bona  fide  indebtedness 90, 135, 764. 00 

All  moneys  invested  in  bonds,  stocks,  joint  stock  companies,  annui- 
ties, or  otherwise. 7, 874, 476. 00 

Bank,  railroad,  and  other  corporation  property  returned  to  county 

auditors... 210,110,948.00 


Total  value 514,384,745.00 

FOREIGN  INSURANCE  COMPANIES. 

Every  agency  of  an  insurance  company  incorporated  outside  the  State  is 
required  to  return  annually  to  the  auditor  of  the  county  in  which  it  does  busi- 
ness or  from  which  it  collects  premiums  the  amount  of  the  gross  premium 
receipts  in  such  county  for  the  calendar  year;  provided,  however,  that  in  the 
case  of  regular  companies,  wherever  property  holders  participate  in  the  surplus 
and  earnings  of  the  company,  dividends  or  surplus  from  previous  payments 
allowed  and  used  in  the  payment  of  current  premiums,  cancellation  or  surrender 
values,  and  commissions  paid  to  citizens  of  the  State  during  the  period  for  which 
receipts  are  reported  are  deducted  from  such  gross  receipts,  and  the  net  amount  so 
obtained  is  the  basis  for  taxation  in  such  county.  Such  gross  premium  receipts 
are  entered  upon  the  tax  list  of  the  proper  county  and  are  subject  to  the  same 
rate  of  taxation  as  other  personal  property. 

The  superintendent  of  insurance  annually  charges  and  collects  from  such  insur- 
ance companies  such  a  sum  as  added  to  the  amount  of  taxes  collected  in  the  vari- 
ous counties  will  amount  to  2*  per  cent  of  the  gross  receipts  as  shown  by  their 
annual  statements  under  oath  to  the  insurance  department.  Upon  failure  to  pay 
such  tax  or  upon  false  statement  of  the  gross  premium  receipts  the  license  of 
such  insurance  company  is  revoked.  The  amount  so  collected  by  the  superin- 
tendent of  insurance  is  paid  into  the  general  revenue  fund  of  the  State.  The 
amount  so  collected  in  1899  was  $142,615.41. 

RAILROAD  COMPANIES. 

Mr.  Frederic  C.  Howe  says: 

•'  Steam  railroads  are  still  assessed  for  taxation  in  Ohio  by  methods  long  since 
abandoned  by  more  progressive  States.  The  plan  is  a  modified  survival  of  the 
general  property  tax," and  has  persisted  by  inertia.  While  most  States  have  appre- 
ciated their  inability  to  measure  railroad  values  by  an  actual  inventory  of  con- 


OHIO    COEPOEATION    TAXES.  '\        77 

C  W I V  H1KSITY 
stituent  elements,  and  have  adopted  methods  based  on  the  idea  that  the  road  is  a 
unit  or  a  system,  and  that  its  value  includes  its  franchise  and  is  indicated  by  its 
capital  stock  or  earning  capacity,  Ohio  has  clung  to  the  theory  that  railroad 
values  are  to  be  determined  in  the  same  manner  as  the  value  of  a  farm  or  stock 
of  goods,  by  enumerating  the  separate  valuations  of  its  real  estate,  right  of  way, 
rails,  rolling  stock,  and  equipment. 

"  The  plan  is  primitive  and  the  results  unsatisfactory.  It  not  infrequently 
favors  dishonesty  on  the  part  of  the  officials. 

"  Valuations  are  low  and  tend  to  become  Lower,  and  bear  no  necessary  relation 
to  the  assessment  of  other  forms  of  wealth." 

Railroad  companies  in  Ohio  are  subject  to  two  forms  of  taxation;  the  first  in  the 
nature  of  an  ad  valorem  property  tax,  and  the  second  in  the  nature  of  an  excise 
tax  levied  by  the  State. 

PROPERTY  TAX. 

Valuations  of  railroad  property  for  assessment  and  taxation  are  made  by  the 
several  auditors  of  counties  through  which  the  roads  pass,  or  within  which  they 
have  their  tracks  or  roadway. 

These  county  auditors  are  constituted  a  board  of  assessors  and  appraisers  to 
revise,  value,  and  apportion  the  property,  moneys,  and  credits  of  such  railroad 
companies  in  the  several  counties.  The  board  keeps  a  complete  record  of  its  pro- 
ceedings, certified  copies  of  which  are  required  to  be  sent  to  the  auditor  of  each 
county  constituting  a  member  of  such  board,  to  be  recorded  and  open  to  public 
inspection. 

This  board  meets  annually  to  ascertain  and  value  the  roadbed,  water  and  wood 
stations,  and  such  other  realty  as  is  necessary  to  the  daily  operation  of  the  roads, 
and  all  the  personal  property  of  the  railroad  companies,  including  moneys  and 
credits  and  the  undivided  profits,  reserve  or  contingent  funds,  and  also  the  equip- 
ment, locomotives,  cars,  machinery,  tools,  etc.,  belonging  to  them  or  under  their 
control. 

The  board  may  require  from  the  officers  of  each  road  a  detailed  statement  under 
oath  of  all  the  items  and  particulars  constituting  such  property,  moneys,  and 
credits,  and  the  value  thereof,  and  may  examine  the  books  and  papers  of  the  road 
and  any  or  all  of  its  officers,  receivers,  servants,  and  agents  touching  any  matter 
relating  to  the  same. 

The  value  of  the  property,  moneys,  and  credits  so  found  is  apportioned  by  the 
board  among  the  several  counties  through  which  the  road  or  any  part  thereof 
runs,  and  to  each  city,  village,  township,  and  district;  the  real  estate,  structures, 
and  stationary  property,  in  proportion  to  the  value  of  the  real  estate,  structures, 
and  stationary  personal  property  therein,  and  the  rolling  stock,  main  track,  road- 
bed, supplies,  moneys,  and  credits,  in  proportion  to  the  length  of  road  in  each 
county,  city,  village,  and  district. 

Where  the  line  of  such  railway  is  divided  into  divisions  or  branches,  it  is 
provided  that  so  much  of  the  rolling  stock  as  belongs  to  or  is  used  solely  upon 
any  one  of  such  divisions  shall  be  apportioned  in  the  same  manner  to  the  county 
or  counties  and  to  each  city,  village,  or  district  through  which  such  division 
runs. 

When  any  railroad  company  has  part  of  its  road  in  the  State  and  part  thereof 
in  another  State,  such  board  is  required  to  take  the  value  of  such  property, 
money,  and  credits,  so  found  as  aforesaid,  and  divide  it  in  the  proportion  which 
the  length  of  such  road  within  the  State  bears  to  the  whole  length  of  such  road, 
apportioning  the  values  thereof  in  the  State  as  aforesaid. 

Certificates  of  such  apportionment  are  sent  to  each  county  auditor  and  to  each 
city,  village,  or  district  interested.  The  several  county  auditors  thereupon  appor- 
tion upon  the  tax  list  the  amount,  as  certified  or  as  equalized  by  the  State  board, 
to  such  county,  city,  village,  or  district. 

The  action  of  the  board  of  county  auditors  is  reviewed  by  the  State  board  of 
equalization  for  railroads,  composed  of  the  State  auditor,  State  treasurer,  commis- 
sioner of  railroads  and  telegraphs,  and  attorney-general.  This  board  has  power 
to  hear  complaints  and  to  equalize  the  valuation  of  the  board  of  county  auditors, 
but  may  not  reduce  the  aggregate  of  the  value  of  the  property  of  railroad  com- 
panies within  the  State  below  the  amount  returned  by  such  board. 

EXCISE  TAX. 

In  1896,  an  act  was  passed  by  which  every  railroad  company  doing  business 
within  the  State  of  Ohio  is  required  to  file  annually  with  the  State  auditor  a 
statement  under  oath  showing  the  name  and  nature  of  the  company,  location 


78  INDUSTRIAL    COMMISSION. 

of  principal  office,  names  and  addresses  of  officers,  and  in  case  of  each  railroad 
situated  wholly  in  Ohio,  the  gross  earnings  from  operation,  and  in  case  of  each 
railroad  partly  within  and  partly  without  Ohio,  the  gross  earnings  from  the  opera- 
tion of  the  entire  line,  with  the  miles  of  line  within  and  without  Ohio. 

The  auditor  of  the  State,  State  treasurer,  and  attorney-general  constitute  a 
.State  board  of  appraisers  and  assessors,  which  proceeds  to  ascertain  and  determine 
the  gross  earnings  of  such  railroads  in  the  State  from  such  reports,  and  reports 
made  to  the  commissioner  of  railroads  and  telegraphs.  When  the  line  of  a  railroad 
coinpany  is  partly  within  and  partly  without  the  State,  such  proportion  of  the 
gross  earnings  are  taxed  as  the  length  of  line  within  the  State  bears  to  the  whole 
mileage. 

The  State  auditor  annually  charges  and  collects  an  excise  tax  of  one-half  of  1 
per  cent  of  such  gross  earnings,  the  proceeds  being  paid  into  the  general  revenue 
fund  of  the  State. 

The  amounts  of  excise  taxes  on  the  gross  earnings  of  railroads  for  the  3  years 
during  which  the  act  has  been  in  force  are  as  follows: 

1897..  .  $304,950.24 

1898 344,715.32 

1899 t__._      363,218.74 

The  excise  tax  per  mile  of  road  was  $41.32  in  1899. 

The  total  value  of  property  of  railroad  companies  in  1897, 1898,  and  1899,  as  fixed 
by  county  auditors  and  equalized  by  the  State  board,  was  as  follows: 

1897..  .  $105,101,916 

1898 105,730,241 

1899 106,487,590 

Statement  of  valuation  of  property  of  railroads  in  1899. 

Maintrack. .  $65,746,848 

Second  track 4, 574, 393 

Branches 2,  733, 564 

Sidings 1 7,229,079 

Rolling  stock 18, 955, 451 

Buildings 4,845,965 

Tools  and  machinery. 780,468 

Moneys,  credits,  etc 1, 618, 986 


Total  of  taxable  property 106,484,754 

Value  fixed  by  State  board,  1899 106, 487, 590 

The  State  and  county  taxes  paid  by  railroad  companies  in  Ohio  on  their  right 
of  way,  real  estate,  and  equipment  for  the  same  years  were: 

1897..  -  $2,816,229.97 

1898 2,614,137.05 

1899  (estimated). 2,662,189.00 

making  the  total  taxes,  State  and  county  and  excise,  in  those  years — 

1897 ..  3,121,087.29 

1898. -. 2,958,852.37 

1899 3,025,407.74 

Total  taxes  per  mile  of  road  in  1899,  $343.54. 

The  gross  earnings  of  railroads,  Ohio  proportion,  in  1898  were  $68,764,938.78.  and 
in  1899  $72,369,848.68. 

The  income,  Ohio  proportion,  after  deducting  operating  expenses,  was  in  1898 
$19,702,720.32,  and  in  1899  $21,101,792.89. 

By  the  foregoing  statement  it  appears  that  railroad  companies  in  Ohio  pay  in 
taxes  nearly  4^  per  cent  of  their  gross  earnings.  Comparison  with  the  taxes  paid 
in  Michigan  and  Wisconsin  shows  that  the  percentage  of  gross  earnings  paid  is 
considerably  in  excess  of  that  levied  in  those  States,  which  impose  a  specific  tax 
only  on  gross  earnings. 

In  Michigan,  in  1899,  the  total  gross  earnings  of  railroads  were  $35,892,864.22, 
and  the  total  tax  amounted  to  $1,063.199.76,  or  about  an  average  of  3  per  cent  of 
the  earnings.  The  graded  rate  in  Michigan  is  from  2  per  cent  to  5  per  cent, 
according  to  the  amount  of  earnings  per  mile.  The  Ohio  roads  undoubtedly  have 
a  greater  average  traffic  and  would  come  within  the  higher  rates. 

The  total  gross  earnings  of  railroads  in  Wisconsin  for  the  year  1898  amounted 
to  $32,139,172.20,  and  the  tax  on  such  earnings  was  $1,247,357.03,  a  small  fraction 
less  than  4  per  cent. 


OHIO    CORPORATION    TAXES.  79 

The  value  of  all  taxable  real  estate  and  personal  property  in  Ohio,  according  to 
the  consolidated  tax  duplicate  of  1897,  was  $1,748,008,639,  and  the  total  tax  levied 
upon  that  basis  amounted  to  $40,721,769.85,  making  the  average  rate  of  taxation 
2.32  per  cent. 

The  aggregate  assessed  valuation  of  all  taxable  property  in  Wisconsin  in  1897  was 
$625,101,151.31,  and  the  aggregate  of  all  taxes  was  $16,663,592.72,  making  the  rate 
of  taxation  2.66  per  cent. 

The  aggregate  valuation  of  property  subject  to  taxation  in  Michigan  in  1896 
was  $1,105,100,000,  and  the  amount  of  taxes  for  that  year  was  $19,500,061;  rate  of 
taxation,  1.76  per  cent. 

This  comparison  is  of  some  value  as  affording  a  measurement  in  contrast  with  a 
modern  method  of  taxation,  entirely  separate  and  distinct  from  the  general  prop- 
erty tax  system  in  both  valuation  and  rate  of  taxation,  but  can  not  be  regarded 
as  a  reliable  criterion  as  to  the  adequacy  of  railroad  taxation  in  Ohio,  even  if  a 
comparison  between  two  utterly  irreconcilable  systems  of  taxation  can  be  made 
a  safe  criterion  at  all. 

The  proportion  of  the  assessed  valuation  to  the  actual  value  of  all  the 
property  of  the  States  named,  assessed  and  unassessed,  can  not  be  given  with  any 
degree  of  accuracy.  From  varying  statistical  statements  of  taxing  officials  and 
investigators,  the  statement  that  the  assessed  valuation  is  not  more  than  one- 
third  of  the  actual  value  of  all  property  would  probably  be  a  very  conservative 
guess. 

THE  OHIO  TAX  COMMISSION'S  REPORT  ON  RAILROADS. 

One  of  the  most  interesting  features  of  the  very  excellent  report  of  the  Ohio 
tax  commission  of  1893  is  its  elaborate  investigation  of  railroad  taxation,  its 
attempt  at  comparison  of  the  burden  imposed  upon  railroads  in  Ohio  with  that 
of  other  property  under  existing  methods,  and  the  proportionate  amount  of  the 
earnings  of  such  property  paid  in  taxes  as  compared  with  that  of  some  other 
forms  of  corporate  property  and  some  city  real  estate — this  in  support  of  the 
contention  of  the  commission  that  the  correct  measure  of  corporate  ability  as  a 
basis  of  taxation  is  income  or  earning  capacity.  Its  recommendations  along 
that  line  and  the  results  of  its  investigation  and  conclusions  are  in  some  respects 
more  surprising  than  sound.  This  feature  of  the  report  has  attracted  special 
attention  throughout  the  country. 

The  commission  attempted  to  arrive  at  the  true  value  of  railroad  property  by  a 
comparison  of  gross  and  net  earnings,  stock-exchange  quotations,  and  bonded 
indebtedness,  the  assessed  valuation  being  compared  with  that  of  1892,  and  finally 
adopted  as  a  fair  method  of  determining  the  value  of  the  property  of  railroads 
within  the  State  the  capitalizing  of  their  net  income  at  6  per  cent.  Up  to  the 
year  1896  the  ad  valorem  valuation  by  county  auditors  was  the  only  method  of 
assessment  and  taxation  of  railroads,  and  the  excise  tax  law  of  that  year,  above  set 
forth,  was  the  recommendation  of  the  commission.  After  showing  that  the 
valuations  by  county  auditors  in  1892  were  less  than  the  valuations  in  1878,  the 
commission  says: 

"  The  valuation  of  the  Lake  Shore  and  Michigan  Southern  Railroad  Company 
in  the  year  1878  was  $12,996,609;  in  the  year  1892  it  was  $12,457,745.  In  the  year 
1878  the  gross  earnings  of  the  whole  Lake  Shore  system  were  $13,505,159,  whereas 
in  the  year  1892  the  gross  earnings  were  $22,415.382,  and  the  net  earnings  were 
$6,612,192  as  against  $5,493,165  in  1878. 

"  The  comparison  for  the  same  respective  years  of  the  valuations  of  the  Cleve- 
land and  Pittsburg  Railway  Company  is  equally  striking.  In  1878  the  whole 
valuation  was  $5,731,000;  in  1892  it  was  $4,495,000.  On  the  other  hand,  the  com- 
pany did  50  per  cent  more  business  in  1892  than  in  1878,  its  gross  receipts  being 
$2,272,166  in  1878  and  $3,429,278  in  1892. 

"  The  Pittsburg,  Fort  Wayne  and  Chicago  Railway  Company  was  assessed  in 
Ohio  in  1878  at  $10,732,001  and  in  1892  at  $10,525,948.  while  the  gross  receipts  in 
1878  were  $7,830,000  and  $11,659,142  in  1892." 

The  commission  says  it  is  hardly  open  to  doubt  ' '  that  the  real  value  of  the 
property  of  many  of  these  railroads  has  greatly  increased,  and  that  this  is  certainly 
true  of  the  leading  lines.  It  is  a  matter  of  common  information  that  the 
through  '  trunk  lines,'  like  the  Pennsylvania  and  Lake  Shore  systems,  have  spent 
enormous  sums  of  money  of  late  years  in  the  improvement  of  their  roadbeds. 

"Again,  the  equipment  of  these  roads  has  improved  with  the  improvements 
made  in  rolling  stock.  The  earning  capacity  per  mile  must  be  vastly  greater  now 
than  it  was  16  years  ago." 

The  commission  attempts  to  determine  the  real  value  of  many  of  the  railways  in 
Ohio.  After  mature  consideration,  the  commission  says  the  railroad  companies 


80  INDUSTE1AL    COMMISSION. 

suffer  no  injustice  if  their  income  is  capitalized  at  6  per  cent ;  this  is  in  effect  determ- 
ining that  their  real  value  is  16£  times  their  net  income,  or,  to  put  it  in  another 
form,  that  anything  that  pays  6  per  cent  is  worth  par.  In  the  case  of  many  of  the 
railway  companies  the  statements  of  the  net  earnings  were  obtained  by  the  courtesy 
of  the  railroad  officials,  and  in  other  cases  from  Poor's  Manual  of  Railroads  for 
the  year  1892.  It  may  perhaps  be  said  that  the  year  1892  was  an  exceptional  year. 
For  a  series  of  years,  however,  since  1886,  the  earnings  of  many  of  our  railways 
had  been  reasonably  constant.  Even  great  systems  like  the  Lake  Shore  Railway 
Company  showed  variations  in  net  earnings  of  comparatively  small  amounts.  It 
is  shown  that  a  large  part  of  the  capital  of  railroad  companies  is  represented  by 
bonds,  which  are  often  the  only  real  capital  which  the  railway  has.  In  most 
cases  the  interest  on  the  bonds  is  regularly  paid  for  long  series  of  years  together. 

Again,  it  is  noted  that  this  method  of  reaching  the  real  value  of  a  railway  com- 
pany's property  is  entirely  independent  of  the  amount  of  stocks  or  bonds  issued 
upon  the  property.  The  earning  capacity  of  the  property  is  its  real  test,  and  not 
at  all  the  judgment  of  the  promoters  of  the  enterprises.  Their  judgment  may  be 
greatly  at  fault;  the  stock  may  be  "  watered,''  to  use  the  popular  phrase,  yet  no 
injustice  is  done  to  the  owners  by  the  method  which  has  been  adopted.  Of  course, 
it  will  be  understood  that  in  determining  the  values  of  those  pr<jperties  which  run 
through  several  States  the  amounts  which  are  proportionate  to  the  mileage  in 
Ohio  were  ascertained. 

Pursuing  these  methods,  it  is  seen,  for  instance,  that  the  real  value  of  the  prop- 
erty of  the  Cleveland  and  Pittsburg  Railway  Company  is  $18,641,207;  it  has  86 
per  cent  of  its  mileage  in  Ohio;  the  real  value  in  Ohio  is  therefore  $16,031.438:  the 
appraised  value  in  Ohio  is  $4,495,228.  Take  another  instance:  The  net  earnings  of 
the  Columbus,  Hocking  Valley  and  Toledo  Railway  Company  are  $1,567,457.33; 
its  real  value  by  this  method  is  determined  to  be  $26,124,289:  it  is  assessed  for  taxa- 
tion in  Ohio  at  $4,024,221.  Taking  the  Baltimore  and  Ohio  Southwestern  Railway 
Company,  its  net  earnings  are  $809.809.40:  its  real  value,  all  in  Ohio,  is  $13.496,825; 
its  assessed  value  is  $2,701,839.  Take  still  another  instance:  The  Toledo  and  Ohio 
Central  Railway  Company  has  net  earnings  of  $506,306.01:  its  total  value,  all  in 
Ohio,  is  $8,438,433;  its  appraised  value  is  $2,461,538. 

It  will  be  useful,  again,  to  compare  the  results  obtained  by  this  method  with  the 
estimates  placed  upon  the  value  of  the  railroad  by  the  investing  public.  If 
all  the  issues  of  stocks  and  bonds  of  a  given  railway  are  taken  and  the  prices  at 
which  they  are  sold  at  the  New  York  Stock  Exchange  in  a  year  of  normal  values 
are  ascertained,  a  means  is  obtained  for  determining  what  estimate  is  placed  upon 
the  value  of  these  railways  by  those  who  in  the  long  run  fix  values — the  persons 
who  buy  for  investment. 

Taking,  for  instance,  the  different  issues  of  bonds  and  stock  of  the  New  York, 
Chicago  and  St.  Louis  Railway  Company,  and  determining  the  value  of  the  entire 
issues  by  the  average  of  the  quotations  at  which  they  were  sold  on  the  New  York 
Stock  Exchange  in  the  year  1892,  it  was  ascertained  that  the  whole  property  was 
worth,  in  the  opinion  of  investors,  about  $28,000,000,  and  that  that  part  of  it  which 
is  in  Ohio  was  worth  $13,196,000.  Its  value  as  determined  by  capitalizing  its 
income  at  6  per  cent  was  found  to  be  $7,633,547.  It  thus  appeared  to  the  com- 
mission that  in  this  case,  at  least,  no  injustice  was  done  to  the  railway  com- 
pany by  the  method  selected. 

The  value  of  the  Cleveland  and  Mahoning  Valley  Railway  Company's  property, 
capitalized  at  6  per  cent,  is  $7,861,336;  capitalized  at  5  per  cent,  it  is  $9,433,600; 
determined  by  the  average  of  quotations  upon  the  New  York  Stock  Exchange 
for  the  year  1892  (partially  estimated),  its  property  was  worth  $8,450.000. 

Again,  the  Lake  Shore  and  Michigan  Southern  Railway  Company  was  worth, 
upon  the  basis  of  the  New  York  Stock  Exchange  quotations,  about  $109,000,000; 
capitalized  at  6  per  cent  it  is  worth  about  $110,000,000. 

It  should  further  be  remembered,  the  commission  said,  that  it  is  impossible  in 
the  case  of  many  railways  to  reach  any  adequate  conclusions  by  determining  their 
values  upon  the  basis  of  their  stock-exchange  quotations.  For  instance,  the  prop- 
erty of  the  New  York,  Pennsylvania  and  Ohio  Railway  Company  is  covered  with 
mortgages  securing  a  bonded  indebtedness  of  about  $90,000,000;  its  capital  stock, 
amounting  to  about  $45,000,000,  is  entirely  held  by  trustees,  who  are  selected  by 
the  bondholders  under  a  scheme  devised  when  the  road  was  reorganized  in  1880. 
The  common  stock  of  the  Baltimore  and  Ohio  Southwestern  Railway  Company 
and  a  large  part  of  the  stock  of  the  New  York,  Chicago  and  St.  Louis  Railway  Com- 
pany are  owned  by  the  Lake  Shore  and  Michigan  Southern  Railway  Company.  In 
all  these  cases  it  is  apparent  that  the  selling  value  of  the  stock  is  determined  by 
other  considerations  than  the  earning  capacity  of  the  railroad.  In  so  far,  how- 
ever, as  the  stock-exchange  valuations  can  be  obtained  for  the  several  properties 


OHIO    COKPOEATION    TAXES.  81 

the  commission  says,  the  figures  obtained  will  bear  out  the  conclusions  reached  by 
the  other  method  adopted;  namely,  the  capitalization  of  the  income  of  the  railway 
companies  at  6  per  cent. 

The  commission  also  obtained  statements  of  the  taxes  paid  in  Ohio,  the  gross 
earnings  and  the  net  earnings  of  all,  or  all  but  one  or  two,  of  the  railways  in 
Ohio.  It  also  obtained  the  percentage  of  mileage  in  Ohio  in  those  cases  where  the 
railway  systems  run  into  other  States.  It  has  been  already  stated  how  the  net 
earnings  were  obtained.  In  almost  every  instance  the  items  of  proportionate 
mileage  in  the  State  and  of  the  taxes  paid  in  Ohio  were  obtained  from  the  audi- 
tors or  other  officials  of  the  several  railway  companies.  By  an  easy  calculation, 
from  this  data,  it  was  determined  what  part  of  the  net  earnings  arose  in  Ohio. 
"It  is  then  possible  to  make  the  same  comparison  which  has  been  made  with 
other  classes  of  investments,  namely,  what  ratio  the  taxes  paid  in  Ohio  bear  to 
the  net  earnings  which  arise  from  the  business  in  Ohio.  It  will,  of  course,  be 
understood  that  net  earnings  include  the  interest  which  is  paid  upon  bonds.  In  an 
economic  sense  bonds  are  capital;  railways  are  built  with  the  avails  of  bonds,  and 
in  many  instances  the  bonds  are  the  only  real  capital.  To  cite  a  single  instance, 
the  bonded  indebtedness  of  the  New  York,  Pennsylvania  and  Ohio  Railway  Com- 
pany is,  as  stated,  over  $90,000,000;  the  stock  of  the  corporation  is  about  $45,000,000; 
the  real  value  of  the  railway  company's  property  has  been  estimated  by  compe- 
tent experts  at  835,000,000.  In  this  case.it  is  certainly  clear  that  the  real  capital 
of  this  corporation  is  represented  by  those  issues  of  bonds  which  correspond  to 
its  true  value  and  which  are  secured  by  the  mortgages  first  in  priority. 

' '  The  following  table  shows  the  percentage  of  taxes  paid  in  Ohio  to  net  income 
arising  in  Ohio  in  the  year  1892  by  a  number  of  railway  companies  which  are 
believed  to  be  representative  ones: 

Percentage. 

Lake  Shore  and  Michigan  Southern 11.22 

Cleveland,  Columbus,  Cincinnati  and  St.  Louis 10.62 

Pennsvlvania  system  6. 90 

The  Valley  Railway 8. 83 

Cleveland'and  Canton 7. 05 

Cleveland,   Lorain  and  Wheeling 6. 39 

Cleveland  and  Pittsburg 8. 48 

Toledo  and  Ohio  Central 6. 54 

Columbus,  Hocking  Valley  and  Toledo 5. 16 

Cleveland  and  Marietta 8. 25 

Cincinnati,  Portsmouth  and  Virginia 17. 94 

Baltimore  and  Ohio  Southwestern 6. 57 

New  York,  Chicago  and  St.  Louis 11.99 

Wheeling  and  Lake  Erie 7. 99 

Cincinnati,  Hamilton  and  Dayton 9. 35 

Baltimore  and  Ohio 6. 02 

"  A  large  number  of  the  smaller  roads  are  omitted  from  this  table. 

"  Again  it  should  be  remembered  that  our  system  of  assessing  railway  property 
estimates  its  value  by  the  mile,  and  that  a  mile  of  road  through  a  country  swamp 
is  worth  as  much  for  taxation  as  a  mile  through  the  heart  of  a  large  city.  The 
result  is  that  the  railway  company  pays  the  low  rates  prevailing  in  the  country 
counties  on  the  great  bulk  of  its  mileage,  and  the  high  rates  of  the  large  cities  only 
on  a  small  fraction  thereof. 

"  If  the  principles  set  forth  in  the  foregoing  discussion  are  correct;  if  it  be  true 
that  the  proper  basis  of  taxation  is  ability  to  pay,  and  if  it  be  true  that  the  correct 
rule  is  proportionality  of  taxes  to  income  or  earning  capacity,  then  it  is  submitted, 
from  the  facts  which  have  been  collected,  that  investments  in  no  other  form  in 
Ohio  pay  in  taxes  so  small  proportion  of  the  earnings  derived  from  the  invest- 
ments as  do  the  investments  in  railway  corporations.  While  investments  in 
improved  real  estate  in  Cleveland  and  elsewhere  pay  from  16  to  25  per  cent  of 
their  gross  rentals  in  taxes;  while  banks  pay  20  per  cent  or  more  of  their  net 
income  in  taxes;  while  investment  securities  are  taxed  at  the  ratio  of  60  to  70  per 
cent  of  their  income;  while  street-railway  companies,  at  least  in  Cleveland,  pay 
25  per  cent  of  their  net  income  in  taxes,  investments  in  railway  property  do  not 
pay  nearly  so  much  proportionately.  Few  railways  of  the  State  pay  as  much  as 
10  per  cent  of  their  net  earnings  in  taxes,  while  the  great  majority  pay  only  from 
6  to  8  per  cent. 

"  To  sum  up  the  conclusions  derived  from  these  considerations:  It  is  found  that 
the  railways  of  the  State  are  assessed  for  taxation  at  only  $105,000,000;  that  the 
railways,  so  far  as  they  can  be  identified,  were  assessed  upon  a  higher  valuation 


82  INDUSTRIAL    COMMISSION. 

in  1878  than  they  are  now;  that  they  only  pay  from  6  to  10  per  cent  of  their  net 
earnings  in  taxes,  while  capital  invested  in  other  classes  of  property  pays  a  much 
larger  percentage  of  its  earnings.  If  their  appraised  valuations  be  compared  with 
their  real  values,  as  determined  by  capitalizing  their  net  earnings  at  6  per  cent, 
it  is  found  that  the  appraised  valuation  is  not  more  than  25  to  33  per  cent  of  their 
real  values.  W*nle  it  is  true  that  land  is  appraised  at  less  than  its  real  value  in 
various  parts  of  the  State,  yet  in  no  considerable  section  is  the  percentage  of  under- 
valuation nearly  so  low  as  this." 

Applying  the  methods  of  the  Ohio  tax  commission  and  capitalizing  at  6  per 
cent  the  net  income  of  railroads  in  Ohio,  which  was  $19,702,720  in  1898,  we  find 
the  true  value  to  be  $328,378,606.  The  total  taxes  paid  in  1898,  including  the  new 
excise  tax,  were  $2,958,852.37,  making  the  rate  of  taxation  on  such  valuation  a 
little  more  than  9'  mills. 

Applying  the  rule  adopted  by  the  tax  commission  to  the  net  earnings  and 
taxes  of  all  Ohio  railways  for  1899,  as  reported  by  the  State  commissioner  of  rail- 
roads, we  have  the  following: 

Total  net  income _ _ $21, 101 , 792. 89 

Total  taxes  paid. . .      3, 025, 407. 74 

Percentage  of  net  income,  14.33,  about  one-seventh. 

Mr.  F.  C.  Howe, referring  to  the  subject, says:  "While  the  burdens  of  other 
property  have  increased  in  recent  years,  the  valuations  on  railroad  property  have 
either  diminished  or  become  stationary." 

As  indicative  of  the  truth  of  this  statement,  Mr.  Howe  produces  the  following 
statistics  of  assessments  and  gross  earnings  of  six  railroad  systems  lying  wholly 
within  the  State  of  Ohio,  which  he  says  are  in  no  sense  exceptional: 


1885. 

1890. 

1896. 

Earnings 

$4  498  423 

$6  097  131 

$10  266  465 

Assessment  

8,  944,  386 

10,  165,  174 

10  000  328 

These  show  that  while  gross  earnings  increased  in  eleven  years  over  200  per 
cent,  the  assessments  increased  little  over  one-tenth. 

Mr.  Howe  says,  further,  that  the  same  disparity  has  been  found  to  exist  in  the 
case  of  all  roads  that  have  been  examined  in  that  State,  and  that  not  only  has 
the  assessment  of  railroad  values  either  diminished  or  remained  stationary, while 
that  of  other  forms  of  property  has  increased,  but  the  valuation  of  the  roads  is 
both  absolutely  and  relatively  lower  than  that  of  any  other  class  of  realty  in  the 
State. 

The  restriction  of  Mr.  Howe's  comparison  to  realty  is  significant  and  suggests 
that  personalty  might  afford  more  just  comparison. 

In  the  consideration  of  new  systems  of  corporate  taxation  in  connection  with  a 
prevailing  general  property  tax,  it  appears  to  be  a  common  diversion  to  under- 
take to  demonstrate  the  justice  or  injustice  thereof  by  contrasts  and  comparisons 
with  the  taxation  of  property  generally,  through  methods  similar  to  those  above 
set  forth.  It  may,  however,  be  regarded  as  questionable  whether  any  such  com- 
parison for  the  purpose  of  determining  upon  a  just  measure  of  taxation  by  new 
and  modern  methods  can  be  satisfactory  or  reliable,  and  whether  such  attempts 
are  not  apt  to  be  entirely  misleading. 

The  rates  of  taxation  under  the  general  property-tax  valuations  form  no  relia- 
ble or  even  approximate  basis  of  taxation  under  a  system  that  is  based  upon  an 
arbitrary  valuation  of  corporate  property,  which  includes  all  elements  of  value, 
real  or  fictitious,  such  as  franchises,  earnings,  earning  capacity,  stocks  and 
bonds,  etc. 

The  necessity  for  new  systems  of  taxation  of  corporations  is  based  upon  the 
assumption  that  the  general  property  tax  is  a  failure,  even  in  its  application  to 
tangible  property,  both  real  and  personal,  and  utterly  inadequate  for  the  just  or 
reasonable  taxation  of  property  of  a  corporate  or  intangible  character.  Conse- 
quently, when  methods  are  devised  based  upon  different  principles  of  taxation,  it 
seems  unsound  and  futile  to  undertake  to  measure  or  compare  their  adequacy  by 
applying  to  the  property  under  one  method  a  rule  of  valuation  which  measures 
all  elements  of  value,  and  from  which  neither  value  nor  property  escapes,  and  com- 
paring it  with  the  taxation  of  property  under  another  method  which  only  partly 
values  a  mere  portion  of  the  property  to  which  it  is  sought  to  be  applied. 


OHIO    COEPOKATION    TAXES.  83 

The  rules  of  valuation  under  these  new  methods  and  the  rates  of  taxation  tinder 
the  old  can  not  form  any  reliable  basis  of  comparison  as  to  taxation  yields.  Such 
comparison  in  the  end  is  the  wildest  guesswork.  New  methods  must  be  consid- 
ered independently,  both  as  to  valuation  and  rates,  to  determine  their  efficiency 
and  the  adequacy  of  taxation  burden. 

Viewed  in  this  light,  the  conclusions  of  the  Ohio  tax  commission  and  the  results 
of  all  similar  methods  of  investigation  appear  less  startling  and  of  questionable 
worth. 

The  conclusion  that  a  great  class  of  corporate  property,  peculiar  in  character 
and  uncertain  and  fluctuating  in  value,  under  a  method  of  valuation  impossible 
of  correct  application,  is  assessed  at  one-third  of  its  real  value,  as  determined  by 
an  arbitrary  method  based  upon  the  uncertain  earning  capacity  of  a  prosperous 
period,  should  be  viewed  in  the  light  of  the  facts  that  other  property  in  large  part 
escapes  taxation  entirely,  is  subject  to  important  exemptions,  and  the  portion  that 
reaches  the  tax  roll  is  greatly  undervalued.  Then  the  justice  of  rates  of  taxation 
may  be  intelligently  considered. 

When  the  statement  is  made  that  a  class  of  property,  upon  a  valuation  of 
$328,378,606,  based  upon  earning  capacity,  pays  a  tax  of  9  mills  upon  each  dollar, 
if  we  try  to  regard  it  in  comparison  with  property  in  general,  subject  to  a  tax 
rate  of  2^  per  cent,  the  theorist  is  apt  to  deduce  erroneous  conclusions  unless  he 
first  discovers  some  method  for  determining  the  earning  value  of  all  existing 
tangible  property,  the  exact  amount  of  moneys,  all  the  deposits,  the  face  value  of 
all  mortgages,  the  earning  power  of  bonds,  stock,  and  all  interest-bearing  or 
dividend-sharing  securities  and  investments,  franchise  values,  the  value  of  busi- 
ness reputation  and  good  will,  in  short,  all  the  manifold  forms  of  value  existing 
under  modern  conditions,  to  complete  the  comparison. 

An  illustration  of  the  results  of  comparison  of  taxation  rates  under  different 
methods  of  valuation  will  be  found  under  the  head  of  ' '  excise  tax  on  electric  light 
and  gas  companies,  etc." 

TELEGRAPH,  TELEPHONE,  AND  EXPRESS  COMPANIES. 

These  companies  are  taxed  under  an  act  known  as  the  Nichols  law.  They  are 
required  to  file  annually  with  the  State  auditor  a  sworn  statement  showing  name 
and  nature  of  company,  location  of  principal  office,  names  and  addresses  of  officers, 
number  of  shares  of  capital  stock,  the  par  and  market  value,  or  if  no  market  value, 
the  actual  value  of  the  shares,  real  estate  owned  in  Ohio  and  the  value  thereof, 
personal  property  in  Ohio,  including  moneys  and  credits  and  the  value  thereof, 
total  value  of  real  estate  and  personal  property  outside  the  State,  length  of  lines 
within  and  without  Ohio,  and  in  the  case  of  telegraph  and  express  companies  the 

Sross  receipts  for  the  year,  from  whatever  source  derived,  from  each  office  in 
hio.  and  the  total  gross  receipts  within  the  State;  and  such  other  information 
as  may  be  required  by  the  State  auditor,  upon  blanks  provided  by  him.  The 
State  auditor,  State  treasurer,  and  attorney-general  constitute  a  State  board  of 
assessors,  which  meets  and  proceeds  to  ascertain  and  assess  the  value  of  the 
entire  property  of  such  companies  within  the  State  in  the  proportion  which  the 
same  bears  to  the  entire  property  of  such  companies,  being  guided  by  the  value 
of  their  capital  stock  and  such  other  evidence  and  rules  as  will  enable  it  to  arrive 
at  the  true  value  in  money. 

This  value  is  apportioned  by  the  State  auditor  among  the  various  counties 
through  which  the  lines  of  such  companies  run  in  proportion  to  the  value  of  the 
property  therein  and  in  the  proportion  that  the  mileage  in  the  respective  coun- 
ties bears  to  the  total  mileage  within  the  State,  and  the  amounts  so  apportioned 
are  in  turn  placed  upon  the  duplicates  of  the  minor  divisions  of  the  counties  and 
taxed  with  other  property  at  local  rates. 

The  valuation  of  the  property  of  telegraph  companies  by  the  board  for  the 
years  1898  and  1899  was  as  follows: 


Company. 

1898. 

1899. 

Postal  Telegraph  Cable 

$306,  693 

$312,  768 

Western  Union  Telegraph 

2  108,073 

2,  099,  401 

Express  companies  are  required  to  make  statements  similar  to  those  required 
of  telegraph  companies,  their  property  is  valued  by  the  same  board,  and  after 


84  INDUSTRIAL    COMMISSION. 

deducting  the  value  of  real  estate  taxed  locally,  is  apportioned  by  the  State 
auditor  among  the  various  counties  in  which  the  company  does  business,  in  the 
proportion  that  the  gross  receipts  in  each  county  bear  to  the  total  gross  receipts 
within  the  State. 
The  valuation  of  the  board  for  the  years  1898  and  1899  was  as  follows: 


-\ 

Company. 

1898. 

1899. 

Adams  Express  

$314  662 

$357  534 

American  Express  

279  518 

362*  638 

National  Express  

34  009 

33  741 

Pacific  Express  

10,521 

10  527 

Southern  Express  . 

11  398 

11  416 

United  States  Express  

277  938 

300  626 

Wells-  Fargo  Express.  .  .  . 

87  481 

83  822 

The  constitutionality  of  this  act  was  tested  in  the  case  of  the  Adams  Express 
Company  v.  Ohio  State  Auditor,  and  its  constitutionality  \vt,s  sustained  by  the 
supreme  court  (51  O.  S.,  492) ,  and  on  appeal  by  the  Supreme  Court  of  the  United 
States  (165  U.  S.,  194),  Justices  White,  Field,  Harlan,  and  Brown  dissenting. 

The  latter  decision  on  the  taxation  of  quasi-public  corporations  of  an  interstate 
character  was  an  exceedingly  important  one.  The  court  held  in  substance  as 
follows: 

The  transportation  of  the  subjects  of  interstate  commerce,  or  the  receipts 
received  therefrom,  or  the  occupation  or  business  of  carrying  it  on,  can  not  be 
directly  subjected  to  taxation,  yet  property  belonging  to  corporations  or  com- 
panies engaged  in  such  commerce  may  be,  and  whatever  the  form,  if  it  is  essen- 
tially only  property  taxation,  it  is  not  within  the  inhibition  of  the  Constitution. 

It  has  often  been  held  that  the  property  of  railroad,  telegraph,  and  sleeping  car 
companies,  engaged  in  interstate  commerce  in  the  several  States  through  which 
their  lines  may  pass,  may  be  valued  as  a  unit  for  the  purpose  of  taxation,  taking 
into  consideration  the  uses  to  which  it  is  put  and  all  the  elements  making  up 
aggregate  value,  and  a  proportion  of  the  whole,  fairly  ascertained,  may  be  taxed 
by  a  particular  State  without  violating  any  Federal  restriction. 

It  has  been  decided  that  a  proper  mode  of  ascertaining  the  assessable  value  of 
so  much  of  the  whole  property  as  is  situated  in  a  particular  State,  as  in  the  case 
of  railroads,  is  to  take  that  part  of  the  value  of  the  entire  road  which  is  measured 
by  the  proportion  of  its  length  therein  to  the  length  of  the  whole,  or  taking  as  the 
basis  of  assessment  such  proportion  of  the  capital  stock  of  a  sleeping-car  company 
as  the  number  of  miles  of  road  over  which  its  cars  run  in  a  particular  State  bears  to 
the  whole  number  of  miles  traversed  by  them  in  that  and  other  States;  or  such  a 
proportion  of  the  whole  value  of  the  capital  stock  of  a  telegraph  company  as  the 
length  of  its  lines  within  a  State  bears  to  the  length  of  all  its  lines  everywhere, 
deducting  a  sum  equal  to  the  value  of  its  real  estate  and  machinery  subject  to 
local  taxation  within  the  State. 

Property,  tangible  and  intangible,  in  one  State  possesses  a  value  in  combination 
and  from  use  in  connection  with  property  and  capital  elsewhere  which  can  right- 
fully be  recognized  in  the  assessment  for  taxation. 

The  whole  property  of  such  a  company  constitutes  a  single  plant — a  unit. 

Such  tax  may  fall  upon  the  business  of  a  company  indirectly,  but  it  is  essen- 
tially a  property  tax,  and  as  such  not  an  interference  with  interstate  commerce. 

The  earlier  decisions  of  the  Federal  courts  had  created  great  confusion  in  the 
practical  methods  for  the  taxation  of  total  State  earnings  or  franchise  values  of 
transportation,  transmission,  and  other  companies  of  an  interstate  character  by 
individual  States,  in  some  instances  preventing  the  adoption  of  modern  methods 
of  taxation  and  in  others  reflecting  grave  doubt  upon  the  validity  of  existing 
methods.  Consequently,  as  the  consolidation  of  such  companies  extended  and 
the  earnings  from  interstate  traffic  increased,  such  values  were  frequently  inade- 
quately taxed  or  relieved  from  taxation  altogether.  The  different  States  were 
therefore  impelled  to  the  adoption  of  devices  for  the  purpose  of  adjusting  them- 
selves to  the  Federal  decisions,  and  the  varying  methods  adopted  for  the  taxation 
of  such  companies  by  different  States  have  resulted  in  an  exceedingly  chaotic  con- 
dition and  in  the  absence  of  unity,  reason,  or  design.  Licenses,  gross-receipts  tax, 
and  capital-stock  tax  are  found  separately  or  in  conjunction  with  the  general  prop- 
erty tax,  in  some  cases  assessed  by  State  boards,  in  others  by  boards  of  county 


OHIO    CORPORATION    TAXES. 


85 


assessors,  and  in  others  by  assessors  of  individual  counties,  proportionately  or 
otherwise. 

This  condition  resulted  in  inequality,  discrimination,  undervaluation,  and  escape 
of  such  property  almost  as  serious  as  in  the  case  of  other  forms  of  property  under 
the  general  property-tax  system. 

This  is  brought  out  in  the  opinion  of  the  court  above  cited,  which  gives  the  rela- 
tive valuation  of  express  companies  in  Ohio  under  the  former  rule  assessing  tan- 
gible property,  including  moneys  and  credits,  but  not  real  estate,  and  the  existing 
one  for  assessment  of  all  property,  including  franchise,  under  the  unit  rule. 


Company. 

Former 
rule. 

Unit  rule. 

Gross  re- 
ceipts in 
Ohio. 

Adams  Express  

$42  065 

$533  095 

$282  181 

American  Express 

23  430 

499  274 

275  446 

United  States  Express  

28  438 

488  264 

358  519 

Total 

93  933 

1  520  633 

916  146 

It  will  be  observed  that  the  valuation  under  the  present  plan  is  16  times  more 
than  under  the  former. 

The  average  rate  of  taxation  in  the  State  for  1899,  to  which  this  value  together 
with  the  value  of  the  real  estate  of  these  companies  was  subjected,  was  2.46  per 
cent. 

This  plan,  under  the  decision  referred  to,  may  be  greatly  developed,  adjusted 
to  modern  industrial  conditions,  and  applied  to  the  various  and  growing  corpora- 
tions whose  values  are  represented  not  by  real  estate  and  tangible  personal  prop- 
erty, but  by  franchise  values,  the  whole  value  being  measured  by  bonds  and  capital 
stock  or  earning  capacity;  and  thereby  such  property  may  be  easily  subjected  tc 
fair,  certain,  and  adequate  taxation,  to  the  relief  of  real  estate  and  personalty 
generally. 

Through  this  general  method  a  State,  by  taxing  all  that  to  which  corporate 
earnings  give  value,  may  indirectly  reach  traffic  of  an  interstate  character.  This 
plan  appears  now  to  enable  all  public-service  corporations,  so  called,  to  be  placed 
on  a  basis  of  taxation  representing  their  entire  value,  and  reaching  franchises  as 
well  as  other  forms  of  property. 

Express  companies  are  probably  more  heavily  taxed  than  any  other  class  of  cor- 
porations in  Ohio.  They  are  subjected  to  3  separate  and  distinct  taxes. 

First.  The  ordinary  local  tax  levied  upon  the  real  estate  of  such  companies 
where  located. 

Second.  A  tax  in  the  nature  of  a  local  tax  by  what  is  termed  the  "unit  rule  " 
of  valuation,  determined  in  like  manner  to  that  of  telegraph  and  telephone 
companies. 

Third.  An  excise  tax  for  State  purposes  only,  based  upon  gross  receipts.  Each 
company  is  required  to  file  annually  with  the  auditor  of  the  State  a  sworn  state- 
ment upon  blanks  furnished  by  the  State  auditor  showing — 

(1)  The  name  and  nature  of  the  company  and  names  of  officers.  • 

(2)  The  entire  receipts  (including  all  sums  earned  or  charged,  whether  actu- 
ally received  or  not)  for  business  done  within  the  State,  of  each  agent  doing 
business  within  the  State  for  and  on  account  of  such  company,  including  its  pro- 
portion of  gross  receipts  for  business  done  by  such  company  within  Ohio  in  con- 
nection with  other  companies;  also  the  total  amount  of  such  receipts  for  business 
done  within  the  State. 

(3)  An  itemized  statement  of  the  amounts  actually  paid  by  such  express  com- 
pany to  the  railroads  within  the  State  for  the  transportation  of  its  freight  within 
the  State,  showing  the  amount  paid  to  each  railroad  company. 

(4)  The  entire  receipts  of  the  company  for  business  done  within  Ohio,  as  defined 
in  the  second  item,  after  deducting  the  amount  paid  for  transportation  of  freight, 
as  defined  in  the  third  item. 

The  State  auditor,  State  treasurer,  and  attorney-general  constitute  a  State  board 
of  appraisers  and  assessors,  who  proceed  to  ascertain  and  determine  the  entire 
receipts,  as  defined  in  the  second  item,  after  deducting  the  sums  paid  for  trans- 
portation of  freight,  as  defined  in  the  third  item,  and  the  amount  so  ascertained 
is  held  and  deemed  to  be  the  gross  receipts  of  such  express  company  for  business 
done  within  Ohio. 


86 


INDUSTRIAL    COMMISSION. 


The  State  auditor  charges  and  collects  from  such  express  companies  2  per  cent 
of  such  gross  receipts,  such  excise  tax  being  paid  into  the  general  fund  of  the 
State.  The  excise  taxes  for  the  years  1898  and  1899  were  as  follows: 


Company. 

1898. 

1899. 

j>tdams  Express  

$2  834  58 

$3  071  12 

American  Express  

"    I'M  ()ii 

2  620  74 

National  Express 

198  92 

237  70 

Pacific  Express  

69  54 

70  12 

Southern  Express  

114  04 

192  26 

United  States  Express 

4  049  30 

3  921  38 

Wells-Fargo  Express  

911  12 

961  46 

Total 

10  602  46 

11  004  78 

SLEEPING,  PALACE,  CHAIR,  DINING,  AND  BUFFET  CARS,  AND 
FREIGHT  LINE  AND  EQUIPMENT  COMPANIES. 

In  1894  an  act  for  the  taxation  of  sleeping,  palace,  chair,  dining,  or  buffet  car 
companies  was  passed,  known  as  the  Griffin  law. 

Sworn  statements  are  required  showing,  among  other  things,  the  number  of 
shares  of  capital  stock,  their  par  or  market  value,  description  and  value  of  real 
estate,  the  whole  length  of  lines  of  railway  over  which  their  cars  run,  and  the 
length  of  such  lines  within  the  State  of  Ohio. 

The  State  board  of  appraisers  and  assessors,  consisting  of  the  State  auditor, 
State  treasurer,  and  attorney-general,  thereupon  determine  the  amount  and  value 
of  the  capital  stock,  the  tax  being  based  on  "  the  proportion  of  the  capital  stock 
of  the  company  representing  rolling  stock  which  the  miles  of  railroad  over  which 
such  company  runs  cars  in  Ohio  bears  to  the  entire  number  of  miles  in  Ohio  and 
elsewhere  over  which  such  company  runs  cars,  and  such  other  rules  and  evidences 
as  will  enable  the  board  to  determine  fairly  and  equitably  the  amount  and  value 
of  the  capital  stock  of  such  company  representing  capital  and  property  owned 
and  used  in  Ohio." 

Real  estate  assessed  and  taxed  locally  is  deducted  from  the  valuation. 

The  State  auditor  charges  and  collects  an  excise  tax  of  1  per  cent  of  the  valua- 
tion reached  by  the  above  means,  the  amount  so  collected  being  paid  into  the 
State  reasury. 

These  provisions  were  subsequently  applied  to  freight  line  and  equipment  com- 
panies, statements  suitable  to  such  companies  being  required  for  the  determina- 
tion of  the  proportionate  value  of  the  stock,  and  the  excise  tax  being  collected  in 
like  manner,  for  like  purpose,  and  at  the  same  rate. 

The  taxes  under  these  laws  were  as  follows: 


Company. 

1898. 

1899. 

Pullman  Palace  Car    .  . 

$3,  699.  66 
2,  214.  00 

$4,  420.  17 
2,  214.  00 
7,738.41 

Wagner  Palace  Car  

Freight  line  and  equipmei 
Total 

it  companies  

7,  689.  57 

13,  603.  23 

14,  372.  58 

EXCISE  TAX  ON  ELECTRIC-LIGHT  AND  GAS  COMPANIES,  ETC. 

Electric-light,  gas,  natural-gas,  pipe-line  (for  natural  gas  or  oil) ,  waterworks, 
street-railroad,  and  messenger  or  signal  companies  are  required  to  file  with  the 
State  auditor  annually  a  sworn  statement  showing,  among  other  things,  the  entire 
gross  earnings  of  the  company  (including  all  sums  earned  or  charged,  whether 
actually  received  or  not)  for  business  done  within  the  State,  including  the  com- 
pany's proportion  of  gross  receipts  for  business  done  by  it  within  the  State  in 
connection  with  other  companies.  The  State  board  of  assessors  and  appraisers 
thereupon  determines  the  entire  gross  receipts  of  such  companies  for  business 
done  in  Ohio.  An  excise  tax  of  one-half  of  1  per  cent  is  levied  and  collected  by 
the  State  auditor  and  paid  into  the  general  revenue  fund  of  the  State.  This  taxa- 
tion is  in  addition  to  the  ordinary  assessment  and  taxation  of  the  tangible  property 
of  such  companies. 


TAXATION    IN    OHIO. 

Such  taxes  in  1898  and  1899  were  as  follows: 


87 


Character  of  business. 

1898. 

1899. 

Electric-light  companies 

$12  089  37 

$12  809  46 

Gas  companies  

20,  375.  23 

20,  595.  24 

Natural-gas  companies                             ... 

8  192  20 

10  894  82 

Pipe-line  companies 

33  818  03 

37  23l>  49 

Waterworks  companies  

2.  250.  84 

2  163.77 

Street-  railway  companies         .             .                  .... 

47  807  02 

49  859  67 

Messenger  and  signal  companies 

788  13 

799  64 

Total                                                .               

125  320  82 

134  348  09 

The  utter  inadequacy  and  injustice  of  the  general  property  tax  as  applied  to 
this  class  of  corporate  property  appears  from  an  examination  of  the  assessments 
of  several  Ohio  street-railway  companies  given  below,  taken  from  the  local  tax 
duplicates,  the  actual  value  being  obtained  by  adding  the  market  value  of  the 
stock  to  the  par  value  of  the  bonds  as  obtained  from  stock-market  quotations. 
It  is  believed  that  even  greater  discrepancy  would  be  shown  in  the  case  of  gas 
and  electric  companies. 


Company. 

Assess- 
ment, 1896. 

Actual 
value. 

Cleveland  Electric  Railway 

$1  121  320 

$9  870  000 

Cleveland  City  Railway           .                                     

678,  460 

6,  560,  000 

Columbus  Street  Railway 

419  700 

4  '802  000 

Cincinnati  Inclined  Plane  Railway  

65,890 

955,000 

Cincinnati  Street  Railway 

637,  760 

18,  140,  000 

Total                                         

2,  923,  130 

40,  327,  000 

The  valuation  under  the  former  assessment  at  an  average  rate  of  taxation  of 
2.5  per  cent  would  yield  $73,078  in  taxes.  To  raise  the  same  amount  on  the  actual 
valuation  would  impose  a  rate  of  taxation  of  only  0.18  per  cent. 

The  latter  valuation  at  a  rate  fixed  at  0.005  would  yield  a  tax  of  $201,635  on  the 
same  property. 

COLLATERAL  INHERITANCE  TAX. 

A  tax  of  5  per  cent  is  imposed  upon  collateral  inheritances  above  the  sum  of 
"),  of  which  75  per  cent  is  paid  into  the  general  revenue  fund  of  the  State  and 
the  balance  is  received  by  the  county  in  which  such  tax  is  imposed. 
In  1898  the  State  received  from  this  tax  $24,159.02;  in  1899,  $17,547.02. 

LIQUOR  AND  CIGARETTE  TAXES. 

The  State  received  from  liquor  and  cigarette  license  taxes  in  1898  and  1899  the 
following  amounts: 


1898. 

1899. 

Liquor  traffic  taxes 

$1  024  324  89 

$1,058,235.08 

Cigarette  traffic  taxes      

13,  460.  73 

13,  643.  68 

INDIANA. 

In  this  State  we  find  established  the  general  property  tax  system — the  attempt 
to  subject  all  property  to  taxation  by  means  of  one  uniform  tax  on  all  classes  of 
property. 

During  the  last  decade  a  persistent  effort  has  been  made  through  legislation  and 
the  improvement  of  the  assessing  machinery  of  the  State  to  perfect  this  system, 
bring  it  into  harmony  with  modern  economic  conditions,  and  apply  it  equitably 
to  all  forms  of  property.  The  keynote  of  the  application  of  this  system  is  the 
assessment  of  all  property  at  its  actual  cash  value,  following  the  rule  laid  down 
by  the  United  States  Supreme  Court  in  a  case  from  Indiana  familiar  to  all  its 
assessing  officers,  that  "  what  property  of  any  kind,  corporate  <5r  individual,  tan- 
gible or  intangible,  is  worth  for  income  or  sale,  it  is  worth  for  taxation/' 

Methods  for  assessment  of  various  kinds  of  property  are  fixed  by  law  in  minute 
detail. 

There  is  little  distinctive  or  new  in  the  system  as  established,  but  there  has  been 
an  organized  effort  on  the  part  of  the  legislature  and  taxing  officials  to  secure 
greater  uniformity  of  assessment,  discovery  of  property  and  correct  valuation 
thereof,  and  modification  of  competitive  undervaluation  by  local  assessors. 

It  was  designated  by  one  public  official  as  "  a  practical  business  system,  and  not 
a  hotchpotch;  "  but  this  statement  must  be  regarded  as  applicable  to  the  system 
for  assessment  by  taxing  officials  rather  than  to  the  system  of  taxation  as  a  whole. 
The  system  of  assessment  in  actual  practice  comprises  the  township  or  ward 
assessor;  the  county  assessor,  elected  to  devote  his  entire  time  to  the  supervision 
of  local  assessments;  the  county  board  of  review,  which  assesses  the  property  of 
certain  corporations  for  county  purposes,  and  to  which  appeal  lies  from  the  assess- 
ment of  township  assessors;  and  a  State  tax  commission,  the  head  of  which  is  the 
governor  of  the  State,  which  assesses  the  property  of  quasi-public  corporations  and 
has  supervision  over  county  assessments,  and  to  which  appeal  lies  from  county 
boards. 

The  valuation  of  the  property  of  railroads  and  other  public-service  corpora- 
tions, so  called,  for  the  purpose  of  taxation,  is  determined  by  the  State  board  and 
apportioned  among  the  several  counties  of  the  State  in  which  such  property  is 
located,  according  to  mileage,  for  entry  and  taxation  with  other  local  property  at 
a  uniform  rate.  This  board,  in  compliance  with  the  mandatory  provisions  of  law, 
aims  to  value  the  property  and  capital  stock  of  such  corporations  at  its  full  mar- 
ket value  upon  the  basis  of  earning  capacity. 

Through  these  varied  methods  of  valuation  it  is  designed  to  bring  all  the  prop- 
perty  of  each  county  upon  the  tax  duplicate  at  its  full  value,  and  to  extend  the 
taxes  at  a  uniform  rate  for  State,  county,  and  local  purposes. 

The  revision  of  the  system  in  1891  was  calculated  to  bring  about  a  reform  in 
the  execution  and  enforcement  of  the  tax  laws  for  the  valuation  of  property, 
rather  than  a  material  change  in  the  system  of  taxation. 

The  provisions  of  the  Indiana  tax  laws  have  been  frequently  assailed  in  the 
courts,  and  in  the  main  sustained,  so  that  there  is  now  little  question  as  to  the 
right  and  authority  of  taxing  officers  to  assess  and  tax  all  forms  of  property  as 
provided  in  the  laws. 

The  law  of  1891  provides  that  all  taxes  shall  be  assessed  on  polls  and  property, 
listed  and  valued  in  an  equal  and  ratable  proportion,  except  such  stocks  and  other 
property  as  may  be  specifically  taxed. 

The  amount  necessary  to  be  charged  for  State  expenditures  and  school  purposes 
is  fixed  by  law,  and  the  amount  to  be  charged  for  county  expenditures  is  deter- 
mined by  the  board  of  county  commissioners. 

The  amount  of  taxes  raised  in  1899  for  State  and  local  purposes  was  about 
$20,000,000. 

It  has  been  held  that  the  constitution  does  not  require  a  uniform  method  of 
valuation  of  property  for  taxation,  but  only  such  method  as  will  insure  a  just 
valuation;  and  further,  that  it  is  not  necessary  that  the  rate  of  taxation  shall  be 
uniform  throughout  the  State,  but  it  is  only  required  that  the  rate  of  assessment 
and  taxation  shall  be  uniform  and  equal  throughout  the  locality  in  which  the  tax 
is  levied. 


TAXATION    IN    INDIANA.  89 

The  law  requires  a  poll  tax  to  be  assessed  upon  every  male  inhabitant  of  the 
State  between  the  ages  of  21  and  50  years.  The  levy  fixed  by  the  legislature  for 
State  purposes  is  50  cents  for  the  general  fund  and  50  cents  for  the  school  fund 
on  every  poll.  The  amount  of  poll  tax  in  1899  was  $560,838. 

GENERAL  PROPERTY  TAX. 

All  property  not  expressly  exempt  is  subject  to  taxation.  What  shall  consti- 
tute real  or  personal  property  for  taxation  is  specifically  defined.  Little  need  be 
said  as  to  the  taxation  of  real  property.  It  includes  all  lands  within  the  State 
and  all  buildings  and  fixtures  thereon  and  appurtenances  thereto,  except  in  cases 
otherwise  expressly  provided  by  law.  This  class  of  property  is  assessed  by  the  local 
assessors,  and  for  the  purpose  of  assessment  is  divided  info  four  separate  classes, 
viz.:  Lands,  improvements  on  lands,  city  or  village  lots,  improvements  on  city 
or  village  lots.  Mortgaged  real  estate  is  assessed  to  the  mortgagor  while  in  his 
possession,  and  at  its  full  value,  with  the  following  exception: 

In  1899  a  law  was  passed  by  which  the  owner  of  land  may  have  the  amount  of 
any  mortgage  thereon  not  exceeding  $700  and  not  more  than  one-half  of  the 
assessed  valuation  of  the  land  deducted  from  the  assessed  valuation  of  such  mort- 
gaged premises.  Such  mortgagor  is  required  to  make  a  statement  showing  the 
name  and  residence  of  the  mortgagee,  which  is  used  by  assessors  for  the  purpose 
of  taxing  the  mortgagee. 

The  amount  of  deduction  in  the  State  under  this  law  in  1900  was  $29,159,931, 
while  the  total  gain  of  taxable  property,  exclusive  of  mortgage  deductions,  was 
$31,723,152,  or  a  net  gain  of  $2,563.221. 

The  total  valuation  of  real  estate  in  1899  was  $860,365,972,  or  about  2f  times  the 
valuation  of  the  personal  property,  and  the  average  rate  of  taxation  was,  roughly 
speaking,  $1.50  on  each  $100  valuation. 

PERSONAL  PROPERTY. 

Personal  property,  for  the  purpose  of  taxation,  includes  all  visible  personalty 
within  the  State  belonging  to  inhabitants;  all  such  property  belonging  to  inhab- 
itants of  the  State  Tbut  situate  without  the  State,  except  the  property  actually  and 
permanently  invested  in  business  outside  the  State;  all  indebtedness  of  every 
kind  due  to  inhabitants  of  the  State  above  the  amounts  respectively  owed  by 
them;  all  shares  in  corporations  organized  under  the  laws  of  the  State,  when  the 
property  of  such  corporation  is  not  exempt  or  is  not  taxable  to  the  corporation 
itself;  all  shares  in  banks  organized  in  the  State,  deducting  the  value  of  real  estate 
taxed  to  the  bank;  all  shares  in  foreign  corporations,  except  national  banks, 
owned  by  inhabitants  of  the  State;  all  moneys,  including  notes  and  certificates, 
circulating  as  currency:  all  annuities  and  royalties. 

It  is  the  express  purpose  of  the  law  throughout  to  enable  assessors  to  reach  for 
taxation  all  property  belonging  to  inhabitants  of  the  State  in  whatever  form  it 
may  exist  or  wherever  it  may  be  located,  at  its  full  value.  Methods  for  the  dis- 
covery and  valuation  of  property  are  provided  with  much  detail,  and  these  pro- 
visions have  been  generally  sustained  by  the  courts. 

It  has  been  held  to  be  within  the  legislative  power  to  make  money,  stocks,  and 
choses  in  action  outside  the  State  and  belonging  to  residents  of  the  State  taxable 
in  the  State,  and  where  a  business  of  buying  and  selling  property,  making  loans 
and  investments  is  conducted  and  the  notes  and  mortgages  so  used  retained  in 
the  State,  although  the  owner  thereof  may  have  his  residence  in  another  State. 
the  property  and  business  are  subject  to  taxation  in  the  State  whether  such  busi- 
ness is  conducted  by  the  owner  or  his  agent. 

Corporate  stock  and  franchises,  except  where  some  other  provision  is  made  by 
law,  are  assessable  locally  at  full  value,  but  shares  in  corporations  all  the  prop- 
erty of  which  is  assessed  to  the  corporation,  are  relieved  from  taxation  in  the  hands 
of  the  shareholders. 

Obligations  secured  by  real-estate  mortgages  are  regarded  as  personalty,  and 
assessed  to  the  owners  as  credits  at  full  value  and  local  rates. 

There  seems  to  be  a  united  and  determined  effort  to  bring  notes  secured  by  mort- 
gage and  other  obligations  and  credits  upon  the  rolls.  Through  the  individual 
listing  of  obligations  by  creditors  and  debtors,  the  cooperation  of  local  and  State 
boards,  record  evidences  of  mortgages,  and  other  means,  assessors  seek  to  discover 
as  much  as  possible  of  this  class  of  property  and  subject  it  to  taxation.  For  this 
purpose  rigorous  power  is  given  to  the  assessors  for  the  discovery  and  listing  of 
su^h  property,  and  inquisitorial  methods  are  provided  by  law. 


90  INDUSTRIAL    COMMISSION. 

There  is  a  law  requiring  the  assignment  of  mortgages  to  be  placed  on  record 
within  45  days.  It  has  been  declared  by  the  supreme  court  to  be  a  settled  law 
that  township  assessors,  county  assessors,  the  auditor  of  State,  boards  of  review, 
and  the  State  board  of  tax  commissioners,  for  the  purpose  of  listing  property  for 
taxation,  have  the  right  to  inspect  and  examine  the  records  of  all  public  offices 
and  the  books  and  papers  of  all  corporations  and  taxpayers  in  the  State,  and  may 
enforce  such  right  by  writ  of  mandamus;  and  that  the  county  auditor  may  main- 
tain an  action  on  the  part  of  his  county  to  set  aside  the  final  settlement  of  a 
decedent's  estate  within  3  years,  and  subject  such  estate  to  the  payment  of  taxes 
on  property  fraudulently  concealed  by  the  decedent  in  his  lifetime.  Thus  the  sin 
of  the  tax  dodger  committed  during  his  lifetime  may  be  atoned  after  his  departure 
from  the  "  Hoosier  "  to  a  taxless  state. 

In  1899  the  supreme  court  affirmed  a  judgment  of  $1,800  recovered  by  the  officers 
of  a  county  as  a  penalty  on  account  of  the  returns  of  false  and  fraudulent  schedules 
of  property  for  taxation. 

It  has  even  been  advocated  by  assessors,  the  governor  concurring  in  the  sug- 
gestion, that  all  notes  be  made  by  law  uncollectable  in  the  courts  unless  they 
bear  upon  their  face  the  stamp  of  the  tax  assessor. 

Interstate  cooperation,  for  the  purpose  of  facilitating  the  discovery  and  assess- 
ment of  mortgages  and  other  sequestered  obligations,  has  also  been  suggested  by 
State  tax  officials  in  their  conferences. 

There  has  been  established  a  system  of  deductions  of  indebtedness  of  taxables 
from  the  various  forms  of  credits,  undue  advantage  of  which,  according  to  state- 
ments of  officials,  is  to  a  great  extent  taken  by  owners  of  that  class  of  property, 
thereby  taking  from  the  tax  duplicates  a  great  deal  of  property  that  should  be 
taxed. 

The  total  valuation  of  personal  property  in  1899,  including  property  and  capital 
stock  of  domestic  corporations  and  all  shares  in  banks,  was  $315,540,675. 

The  provisions  for  the  discovery  and  assessment  of  personal  property  being  a 
distinguishing  and  important  feature  of  the  Indiana  system  of  taxation,  it  is 
essential  to  set  forth  the  methods  employed. 

For  the  purpose  of  properly  listing  and  assessing  property  for  taxation  and 
equalizing  and  collecting  taxes,  the  township  assessor,  county  assessor,  board  of 
review,  auditor  of  State,  and  State  board  of  tax  commissioners  each  have  the 
right  to  examine  and  inspect  the  records  of  public  offices  and  books  and  papers 
of  all  corporations  and  taxpayers  in  the  State,  and  all  assessors  and  other  officers 
charged  with  the  duty  of  listing  property  for  taxation  are  required  to  give  in 
writing  all  information  they  may  obtain  regarding  the  concealment  of  property 
from  taxation  by  any  person  or  corporation  to  the  county  auditor  or  board  of 
review,  to  the  auditor  of  State  or  State  tax  commissioners. 

Each  taxable  is  required  to  give  a  minute  detailed  statement  of  all  the  various 
items  of  personal  property  owned  or  held  in  trust  by  him,  the  blank  schedule 
provided  for  that  purpose  containing  100  different  items,  and  to  affix  what  he 
deems  the  true  cash  value  to  each  item  for  the  guidance  of  the  assessor. 

The  determination  of  the  valuation  of  each  item  is  made  by  the  assessor,  who 
may,  if  he  deems  it  necessary,  examine  the  taxable  under  oath,  and  must  be  gov- 
erned by  what  is  the  true  cash  value,  particularly  defined  to  be  the  market  or 
usual  selling  price  at  the  place  where  the  property  is,  and  if  there  be  no  market 
value,  the  actual  value  governs. 

Every  company,  association,  or  person  not  incorporated  for  banking  purposes 
who  engages  in  the  business  of  lending  money,  receiving  money  on  deposit,  buying 
or  selling  bills  of  exchange,  notes,  bonds,  or  stocks,  or  other  evidence  of  indebted- 
ness, with  a  view  to  profit,  is  required  each  year  to  furnish  the  assessor  a  detailed 
statement  of  his  business  and  property,  to  be  listed  for  taxation  in  a  manner  specially 
provided. 

Severe  penalties  are  imposed  for  false  statements,  and  any  prosecuting  attor- 
ney, upon  notification  of  such  statement,  is  required  to  prosecute  the  offender  to 
final  judgment  and  execution,  receiving  himself,  in  addition  to  his  regular  com- 
pensation, 10  per  cent  commission  on  all  money  so  collected  and  a  docket  fee  of 
$10  to  be  taxed  against  the  offender.  In  case  any  taxable  refuses  to  make  out  a 
statement  or  subscribe  to  any  oath  required,  the  assessor  ascertains  as  best  he 
may  the  number  and  description  of  articles  and  property  belonging  to  him,  and 
the  value  thereof,  and  the  county  auditor  adds  to  such  valuation  50  per  cent 
thereof. 

For  the  purpose  of  listing  and  assessing  property  for  taxation  an  assessor  is 
elected  in  each  township  for  a  term  of  4  years,  whose  duty  it  is  to  assess  the  real 
and  personal  property  in  his  township  as  particularly  provided  by  law,  except 
that  assessed  by  the  county  assessors  or  State  board,  as  hereafter  set  forth.  All 


TAXATION    IN    INDIANA.  91 

real  estate  is  assessed  once  in  4  years,  and  each  year  the  assessor  assesses  any 
improvements  made  thereon  and  notes  and  lists  all  changes  found  since  the  pre- 
ceding assessment. 

He  also  assesses  all  the  personal  property  he  can  discover  by  the  rigorous 
methods  specially  provided,  except  capital  stock,  which  is  assessed  by  the  county 
board,  and  property  of  quasi-public  corporations,  assessed  by  the  State  board. 

The  returns  of  these  local  assessors  are  made  to  the  county  auditor,  who,  if  sat- 
isfied that  any  real  estate  or  personal  effects  have  been  omitted,  may  authorize 
anfl  require  the  proper  assessor  to  correct  any  error  or  omission,  but  can  not 
increase  the  assessment  of  property  as  returned'  although  purposely  undervalued. 

Once  in  every  4  years  a  county  assessor  is  elected  in  each  county,  who  is  not  eli- 
gible for  reelection  more  than  twice  in  any  term  of  12  years,  and  who  devotes 
his  entire  time  to  the  duties  of  his  office.  Such  county  assessor  receives  all  returns 
of  real  and  personal  property  made  by  the  several  local  assessors  in  the  county, 
together  with  the  assessment  lists,  securities,  statements,  maps,  and  other  papers 
filed,  and  it  is  his  duty  to  make  a  careful  examination  of  the  tax  duplicates  of  the 
county,  and  also  of  all  other  records  and  papers  in  the  offices  of  the  county  audi- 
tor, treasurer,  recorder,  clerk,  sheriff,  and  surveyor,  local  assessors'  books,  all 
omitted  assessable  property  of  every  kind  or  nature,  including  tax  certificates, 
mortgages,  debts,  judgments,  claims,  and  allowances  of  courts,  legacies,  and 
property  in  the  hands  of  administrators  and  other  trust  officers,  and  for  that  pur- 
pose has  all  the  rights  and  powers  given  by  law  to  local  assessors  for  the  examina- 
tion of  taxables  and  their  property  and  the  discovery  and  assessment  of  the  same, 
and  he  may  list  and  assess  any  omitted  property  that  he  may  so  discover  at  any 
time  during  the  year.  Such  county  assessor  is  also  required  to  advise  and 
instruct  all  township  officers  in  his  county  as  to  their  duty  under  the  laws,  and 
for  that  purpose  must  visit  each  local  assessor  each  year.*  In  short,  the  county 
assessor  has  supervision  over  all  local  assessors  and  their  work,  with  full  power 
to  list  and  assess  upon  the  rolls  all  property  omitted  by  the  assessors  under  him; 
and  he  and  the  local  assessors  constitute  an  organized  force  for  the  discovery 
and  assessment  of  property. 

There  is  also  an  annual  county  board  for  the  review  of  assessments  and  valua- 
tion of  real  estate  and  personal  property  in  each  county,  composed  of  the  county 
assessor,  county  auditor,  and  county  treasurer,  with  2  freeholders  appointed  by 
the  judge  of  the  circuit  court,  the  county  assessor  being  president  and  the  county 
auditor  secretary  of  said  board  of  review.  Such  board  has  power  to  hear  com- 
plaints of  any  owner  of  personal  property  except  "  railroad  track  "  and  "  rolling 
stock,"  to  equalize  the  valuation  of  property,  and  to  correct  any  list  or  valuation 
as  it  may  deem  proper  and  necessary  to  fix  the  assessment  at  its  true  cash  value. 

It  corrects  all  errors  in  names  of  persons,  descriptions  of  property,  and  the 
assessments  and  valuations  thereof,  and  causes  to  be  done  whatever  may  be 
necessary  to  make  the  lists  and  assessments  comply  with  the  law,  and  where  it 
appears  that  any  property  owner  had  bona  fide  indebtedness,  the  same  is  deducted 
from  the  amount  of  his  credits  listed  in  the  county,  and  he  is  assessed  only  on  the 
residue  of  his  credits  fixed  by  the  board  of  review. 

It  is  also  the  duty  of  this  board  to  inquire  as  to  the  valuation  of  the  various 
classes  of  property  in  the  respective  townships  and  divisions  of  the  county  and 
make  such  changes  as  may  be  necessary  to  equalize  the  same  as  between  the 
townships,  but  it  has  no  power  to  reduce  the  aggregate  valuation  of  all  the  town- 
ships below  the  true  cash  value  nor  to  increase  the  same  beyond  the  amount 
actually  necessary  for  a  proper  and  just  equalization.  It  is  also  the  duty  of  the 
board  to  value  and  assess  for  taxation  the  capital  stock,  franchises,  and  privileges 
of  certain  private  corporations,  as  hereinafter  set  forth  under  the  head  of  corporate 
taxation. 

There  is  also  a  State  board  of  tax  commissioners,  consisting  of  2  skilled  and 
competent  persons,  not  more  than  1  from  the  same  political  party,  together  with 
the  governor,  secretary  of  state,  and  auditor  of  state — the  last  3  being  ex-officio 
members,  and  the  governor  being  chairman.  It  is  the  duty  of  this  board — 

First.  To  prescribe  all  forms  of  books  and  blanks  used  in  the  assessment  and 
collection  of  taxes. 

Second.  To  construe  the  tax  and  revenue  laws  of  the  State  and  instruct  them  in 
relation  to  their  duties  with  reference  to  taxation  and  assessments  whenever 
requested  so  to  do  by  any  officer  acting  under  any  other  person  interested  therein. 

Third.  To  see  that  all  assessments  of  property  are  made  according  to  law. 

Fourth.  Especially  to  see  that  all  the  railroads  and  other  corporations  of  the 
State  are  assessed  and  taxed  as  provided  by  law. 

Fifth.  To  see  that  all  taxes  due  the  State  are  collected. 

Sixth.  To  enforce  penalties  prescribed  by  any  revenue  law  of  the  State  for 
disobedience  of  its  provisions. 


y^  INDUSTRIAL    COMMISSION. 

Seventh.  To  determine,  whenever  necessary,  the  amount  required  to  be  levied 
upon  property  in  the  several  counties  to  cover  any  deficiency  in  the  State  revenue 
not  otherwise  provided  for. 

Eighth.  To  examine  all  books  and  accounts  and  all  persons  necessary  to  enable 
it  to  obtain  all  information  required  to  aid  in  securing  a  compliance  with  the  tax 
laws  by  all  persons  or  corporations  liable  to  taxation. 

Ninth.  To  make  such  rules  and  regulations  as  it  may  require. 

Tgnth.  To  report  to  the  general  assembly  at  each  session  the  amount  of  revenue 
collected  in  the  State  for  all  purposes,  classified  as  to  State,  county,  township,  and 
municipal  purposes,  with  the  sources  thereof,  and  such  other  matters  of  informa- 
tion concerning  the  public  revenues  as  it  deems  of  public  interest. 

Eleventh.  To  make  investigation  concerning  the  revenue  laws  and  assessments 
of  other  States  and  countries,  and  with  the  aid  of  information  thus  obtained  and 
of  its  own  experience  and  observation  to  recommend  to  the  general  assembly,  at 
each  session  thereof,  such  amendments,  changes,  or  modifications  of  revenue  laws 
as  it  may  deem  advisable. 

Twelfth.  To  see  that  each  county  of  the  State  is  visited  at  least  by  1  member  of 
the  board  as  often  as  once  each  year  to  hear  complaints  and  collect  information 
concerning  the  workings  of  the  tax  laws.  Said  board,  or  any  riember  thereof, 
has  the  power  to  subpoena  and  examine  witnesses,  and  has  access  to  and  power 
to  order  the  production  of  any  books  or  papers  in  the  hands  of  any  person  or 
corporation  whenever  necessary  in  the  prosecution  of  any  inquiry  made  in  an 
official  capacity. 

Any  taxpayer  who  may  be  dissatisfied  with  the  action  of  the  county  board  of 
review  has  the  right  to  appeal  from  such  board  to  the  State  board,  and  in  like 
manner  any  township  or  county  assessor  or  member  of  the  county  board  has  the 
right  to  appeal  to  such  State  board  from  any  assessment  or  order  of  the  county 
board.  It  is  also  the  duty  of  the  State  board,  and  it  has  exclusive  authority,  to 
value  and  assess  for  taxation  all  railroad  property  denominated  for  that  purpose 
"  railroad  track  " and  improvements  thereon  and  "rolling stock,"  and  all  property 
belonging  to  telephone,  telegraph,  palace  car,  sleeping  car,  drawing-room  car, 
dining  car,  express  and  fast  freight,  and  other  associations  transacting  business  in 
the  State,  and  for  that  purpose,  and  to  hear  appeals  and  applications  for  revisions 
and  assessments  and  equalize  assessments  of  real  estate,  the  board  is  required  to 
convene  annually  at  a  stated  time. 

CORPORATE  TAXATION. 

Having  completed  the  description  of  the  main  features  of  the  tax  system  of 
Indiana  relating  to  the  assessment  of  real  and  personal  property  generally,  the 
discovery  and  listing  thereof,  and  the  assessing  machinery  of  the  State  from  the 
local  township  assessor  to  the  State  board  of  tax  commissioners,  we  turn  now  to 
the  subject  of  general  corporation  taxes. 

As  we  have  already  observed,  there  is  no  distinct  or  separate  system  for  the 
assessment  and  taxation  of  such  property,  it  being  a  part  of  and  mingled  with 
the  general  property  tax  system  of  the  State. 

The  laws  for  the  assessment  and  taxation  of  corporate  property  are  designed 
to  reach  and  bring  it  all  upon  the  tax  rolls  with  all  other  property,  upon  the  same 
basis  of  valuation  and  the  same  local  rates  of  taxation,  the  practical  result 
depending  upon  the  judgment  and  action  of  the  local  assessors. 

The  real  estate  and  tangible  personal  property  of  corporations,  except  as  spe- 
cially provided  for  bylaw,  are  assessed  and  valued  for  taxation  by  local  assessors, 
the  same  as  other  real  and  personal  property  of  their  respective  localities,  and 
the  capital  stock  and  franchises  by  county  boards. 

While  substantially  all  classes  of  corporate  property  are  valued  and  assessed 
upon  the  several  county  rolls  and  extended  for  taxation  with  other  property  at 
the  same  rate,  we  shall  consider  each  separately. 

BANKS. 

The  shares  of  capital  stock  of  any  bank  are  assessed  to  the  owners  where  the 
bank  is  located  and  taxed  at  the  rate  at  which  other  personal  property  in  the  same 
locality  is  taxed.  The  officers  of  each  bank  are  required  each  year  to  make  out  a 
statement  under  oath,  in  duplicate,  showing  the  number  of  shares  of  capital 
stock,  true  cash  value  of  each  of  said  shares,  and  also  the  true  cash  value  of  the 
entire  capital  stock  of  the  bank,  and  such  bank  stock  is  thereupon  listed  and 
assessed  in  all  respects  the  same  as  similar  property  belonging  to  other  corpora- 
tions and  individuals.  Real  estate  and  other  tangible  property  assessed  to  the 


INDIANA    COEPORATION    TAXES.  93 

bank  is  deducted  from  the  valuation  of  the  capital  stock.  In  making  such  state- 
ment of  the  true  cash  value  of  shares  the  credits  are  given  and  the  bona  fide 
indebtedness  of  the  bank  deducted  therefrom,  as  in  the  case  of  individuals. 

The  assessor,  in  determining  the  cash  value  of  the  shares  of  stock,  may  examine 
the  officers  under  oath,  and  in  fixing  such  value  is  governed  by  the  market  or  usual 
selling  price  of  such  stock  at  private  sale  at  the  place  where  the  bank  is  located, 
and  if  there  is  no  market  value,  he  otherwise  determines  the  actual  value,  tak- 
ing into  consideration  the  surplus  and  profits,  if  any.  Taxes  on  such  shares  are 
required  to  be  paid  by  the  owner  in  the  place  where  the  bank  is  located,  in  the 
same  manner  that  other  individuals  or  corporations  pay  taxes,  and  it  is  made  the 
duty  of  each  bank,  after  being  notified  to  do  so,  to  retain  so  much  of  any  divi- 
dends belonging  to  stockholders  as  shall  be  necessary  to  pay  any  tax  levied  upon 
their  stock,  until  it  is  made  to  appear  that  such  taxes  have'been  paid. 

This  class  of  corporate  property  being  mingled  with  other  property  upon  the 
county  duplicates  and  taxed  at  a  uniform  rate,  we  are  unable  to  give  a  separate 
valuation  thereof  or  the  amount  of  taxes  paid  upon  it  in  the  State.  It  is  included 
in  the  assessed  valuation  of  personal  property,  which  in  1899  was  $315,540,675. 

FOREIGN   INSURANCE  COMPANIES. 

There  is  a  distinct  departure  from  the  general  system  of  the  State  in  the  taxa- 
tion of  these  companies. 

Every  such  company  is  required  to  report  semiannually  to  the  auditor  of  state, 
under  oath,  the  gross  amount  of  all  receipts  received  in  the  State  on  account  of 
insurance  premiums  for  the  6  months  preceding,  and  at  the  time  of  making  such 
report  pay  into  the  treasury  of  the  State  the  sum  of  $3  on  every  $100  of  such 
receipts,  less  losses  actually  paid  within  the  State. 

The  yield  of  this  tax  in  the  year  ending  July  1,  1899,  was  as  follows: 

From  fire  companies $57, 695. 77 

From  life  companies 93, 172. 77 

Total _     150,868.54 

The  total  amount  paid  by  such  companies  for  the  year  ending  July  1, 1900,  was 
$167,349.59. 

FOREIGN   BRIDGE   COMPANIES. 

Every  foreign  bridge  company  doing  business  in  the  State  is  required  to  report 
to  the  assessor  of  the  county  in  which  any  part  of  its  business  is  carried  on,  under 
oath,  the  gross  amount  of  all  moneys  received  and  a  list  of  its  tangible  property 
within  the  county,  and  true  cash  value  thereof.  The  amount  of  such  gross  receipts, 
together  with  the  true  cash  value  of  such  tangible  property,  is  entered  on  the  tax 
duplicate  of  the  proper  county,  and  the  taxes  so  assessed  become  a  lien  upon  the 
property  until  paid. 

GENERAL  DOMESTIC  CORPORATIONS. 

Every  street  railroad,  waterworks,  gas,  manufacturing,  mining,  gravel  road, 
plank  road,  savings  bank,  insurance,  and  other  association  incorporated  under 
the  laws  of  the  State  (except  railroad  companies  and  others  especially  designated) 
is  required  each  year,  in  addition  to  the  tangible  property  to  be  listed,  to  make 
and  deliver  to  the  local  assessors  a  sworn  statement  of  the  amount  of  its  capital 
stock,  setting  forth  paricularly — 

First.  The  name  and  location  of  the  company  or  association. 

Second.  The  amount  of  capital  stock  authorized,  and  number  of  shares. 

Third.  The  amount  of  capital  stock  paid  up. 

Fourth.  Market  value,  or  if  no  market  value,  the  actual  value  of  the  shares. 

Fifth.  Total  amount  of  indebtedness  except  that  for  current  expenses,  excluding 
from  such  expenses  the  amount  paid  for  the  purchase  or  improvement  of  property. 

Sixth.  The  value  of  all  tangible  property. 

Seventh.  The  difference  in  value  between  all  tangible  property  and  the  capital 
stock. 

Eighth.  The  name  and  value  of  each  franchise  or  privilege  owned  or  enjoyed  by 
such  corporation. 

Such  statement  is  scheduled  and  returned  by  the  assessor  to  the  county  auditor, 
who  lays  the  same  before  the  county  board  of  review,  which  values  and  assesses 
the  capital  stock  and  all  franchises  and  privileges  of  such  companies  within  the 
county  in  the  manner  provided,  and  the  auditor  computes  and  extends  the  taxes 


94  INDUSTRIAL    COMMISSION. 

for  all  purposes  on  the  respective  amounts  so  assessed,  the  same  as  on  other  prop- 
erty in  the  towns,  cities,  or  other  localities  where  such  companies  are  located. 

Where  the  capital  stock  so  valued  exceeds  in  value  that  of  the  tangible  property 
listed  for  taxation,  it  is  subject  to  taxation  upon  such  excess  of  value;  where  no 
tangible  property  is  returned  or  found,  and  the  capital  stock  has  a  value,  it  is 
assessed  for  its  true  cash  value,  but  where  the  capital  stock  or  any  part  thereof  is 
invested  in  tangible  property  returned  for  taxation,  such  capital  stock  is  not 
assessed  to  the  extent  that  it  is  so  invested.  Every  franchise  or  privilege  of  the 
corporation  is  likewise  assessed  at  its  true  cash  value. 

Where  the  full  value  of  any  franchise  is  represented  by  the  capital  stock  listed 
for  taxation,  then  such  franchise  is  not  itself  taxed;  but  in  all  cases  where  the 
franchise  is  of  greater  value  than  the  capital  stock,  then  the  franchise  is  assessed 
at  its  full  cash  value,  and  the  capital  stock  in  such  case  is  not  assessed. 

In  case  of  the  failure  or  refusal  of  any  person  or  company  to  make  such  state- 
ment, the  auditor  of  State  is  required  to  make  out  such  statement  and  valuation 
from  the  best  information  he  can  obtain,  and  for  that  purpose  has  power  to  sum- 
mon and  examine  under  oath  any  person  whom  he  may  believe  to  have  a  knowl- 
edge thereof,  and  is  required  to  add  25  per  cent  to  such  valuation. 

The  property  of  these  corporations,  including  their  capital  stoctf,  is  included  in 
the  personal  property  valuation  and  assessment. 

RAILROAD   PROPERTY. 

Every  railroad  company  is  required  to  cause  its  taxable  property  to  be  listed 
annually  with  reference  to  its  amount,  kind,  and  value.  It  is  required  to  make 
and  file  with  the  county  auditors  of  the  respective  counties  in  which  the  railroad 
is  located  a  statement  or  schedule,  verified  by  oath,  showing  the  property  held  for 
right  of  way  and  the  length  of  the  main  and  all  side  and  second  tracks  and 
turn-outs  in  such  counties  and  in  each  city  and  town  through  which  the  road  runs, 
and  also  to  state  the  value  of  improvements  and  stations  located  on  the  right  of 
way. 

Such  rights  of  way,  including  the  superstructures,  main,  side,  or  second  tracks, 
and  turn-outs,  and  telegraph  poles,  wires,  instruments,  and  other  appliances,  with 
the  stations  and  improvements  on  such  right  of  way  (excepting  machinery,  sta- 
tionary engines,  and  other  fixtures,  which  are  considered  personal  property)  are 
held  to  be  real  estate  for  the  purpose  of  taxation,  and  are  listed  and  valued  as 
"  railroad  track." 

The  value  of  "  railroad  track  "  is  listed  and  taxed  in  the  several  counties,  town- 
ships, cities,  and  towns  in  the  proportion  that  the  length  of  the  main  track  in  such 
local  division  bears  to  the  whole  length  of  the  road  in  the  State,  except  the  value 
of  the  side  or  second  track  and  all  the  turn-outs,  station  houses,  depots,  machine 
shops,  or  other  buildings  belonging  to  the  road,  which  are  taxed  in  the  county, 
township,  city,  or  town  in  which  the  same  are  located. 

The  movable  property  belonging  to  a  railroad  company  is  held  to  be  personal 

Eroperty,  and  denominated  for  the  purpose  of  taxation  "rolling  stock;"  it  is 
sted  and  taxed  in  the  several  townships,  cities,  and  towns  in  the  proportion  that 
the  main  track  used  or  operated  in  each  local  division  bears  to  the  length  of  the 
main  track  used  or  operated  by  such  company. 

All  real  estate  other  than  that  denominated  "  railroad  track."  with  improve- 
ments thereon,  is  listed  as  "land"  and  "  lots."  as  the  case  maybe,  in  the  county 
and  township,  town,  or  city  where  the  same  is  located. 

Each  company  is  also  required  to  return  annually  to  the  county  auditor  a  veri- 
fied list  or  schedule  containing — 

First.  A  full  and  correct  detailed  inventory  of  all  the  rolling  stock  belonging 
to,  leased,  or  operated  by  such  company,  setting  forth  the  number  of  locomotives 
and  tenders  of  all  classes,  passenger  cars,  and  all  other  kinds  of  cars,  and  the  true 
cash  value  thereof  set  opposite  each,  and  also  to  set  forth  the  number  of  miles  of 
main  track  on  which  such  "rolling  stock "  is  used  in  the  State. 

Second.  A  full  and  correct  inventory  of  all  the  other  personal  property  not 
specifically  taxed,  including  the  tools  and  machinery  for  repairs,  and  machinery, 
fixtures,  and  stationary  engines,  which  property  must  be  classified  according  to 
the  particular  county,  township,  city,  and  town  in  which  the  same  may  be,  with 
the  true  cash  value  thereof. 

Third.  An  inventory  of  all  the  real  estate  except  "  railroad  track,"  which  shall 
also  be  listed  as  to  the  amount,  kind,  and  value. 

The  county  auditor  returns  to  the  proper  assessor  a  copy  of  so  much  of  said  list 
as  is  contained  in  the  second  and  third  specifications,  and  such  property  is  listed 
and  assessed  by  him  as  other  similar  property  belonging  to  individuals. 


INDIANA    CORPORATION    TAXES.  95 

Each  company  is  also  required  to  return  to  the  auditor  of  State  sworn  statements 
or  schedules,  as  follows: 

First.  All  "  railroad  track,"  giving  length  of  main  and  second  tracks  and  turn- 
outs, the  proportion  in  each  county  and  township,  and  the  total  in  the  State. 

Second.  The  "rolling  stock,"  with  length  of  main  track  in  each  county  and 
entire  length  of  the  road  in  the  State. 

Third.  The  number  of  ties  in  track  per  mile,  weight  of  iron  or  steel  per  yard 
used  in  the  main  or  side  tracks,  what  joints  or  chairs  are  used  in  track,  the  bal- 
lasting of  road,  number  and  quality  of  buildings  or  other  structures  on  "  railroad 
tracks,"  length  of  time  iron  or  steel  has  been  used,  and  length  of  time  the  road 
has  been  built. 

Fourth.  A  statement  showing — 

(1)  The  amount  of  capital  stock  authorized  and  the  number  of  shares. 

(2)  The  amount  of  capital  stock  paid  up. 

(3)  The  market  value,  or,  if  no  market  value,  the  actual  value  of  the  shares. 

(4)  The  total  amount  of  all  indebtedness  except  for  current  expenses  for  operat- 
ing the  road. 

(5)  The  total  listed  valuation  of  its  tangible  property  in  the  State. 

Severe  penalties  are  imposed  for  failure  to  make  the  statements  or  schedules 
required. 

The  auditor  of  State  each  year  lays  before  the  State  board  of  tax  commissioners 
the  various  statements  and  schedules  made  by  railroad  companies.  In  assessing 
railroad  property  the  State  board  has  exclusive  authority  to  value  and  assess 
"  railroad  track "  and  ''rolling  stock "  as  a  unit,  taking  into  consideration  capital 
stock  and  earning  capacity.  The  amounts  determined  and  assessed  are  appor- 
tioned and  certified  by  the  auditor  of  State  to  the  county  auditors  of  counties 
through  which  the  railroad  runs,  who  enter  the  railroad  property  of  all  kinds  as 
listed  for  taxation  in  their  counties  upon  the  proper  tax  duplicates,  enter  the  valu- 
ation as  assessed,  distribute  the  values  to  the  several  townships,  cities,  and  towns 
entitled  to  a  proportionate  value,  and  against  such  valuation  compute  and  extend 
all  taxes  for  which  said  property  is  liable,  the  same  as  against  other  property. 
The  county  treasurer  collects  the  taxes  charged  against  railroad  property  in  his 
county  and  pays  over  and  accounts  therefor  in  the  same  manner  as  other  taxes 
are  collected  and  accounted  for. 

The  State  board,  in  fixing  the  valuation  of  corporate  property  for  taxation,  is  not 
confined  for  information  to  the  statements  of  such  corporations,  but  may  resort  to 
other  available  means  to  obtain  information,  and  for  that  purpose  is  given  the 
power  and  authority  to  examine  persons  and  papers. 

The  following  quotation  from  an  address  of  the  auditor  of  State,  at  a  recent 
conference  of  tax  commissioners,  may  indicate  the  spirit  in  which  the  valuation 
of  this  class  of  property  is  made,  and  an  attempt  on  the  part  of  the  State  board  to 
make  such  valuations  accord,  so  far  as  may  be,  with  the  valuation  of  property  in 
general: 

"  The  law  of  1891  affords  a  basis  of  computation  that  places  it  on  the  duplicate 
in  line  with  the  values  of  all  other  classes  of  property,  just  and  fair  to  these  large 
commerce-carrying  corporations  of  the  county.  The  greater  portion  of  the  time 
of  the  State  board  is  dedicated  to  the  assessment  of  railroads.  There  are  few  if 
any  of  these  lines  but  what  could  duplicate  anew  their  properties  within  the  valu- 
ation placed  upon  them;  but  there  are  other  elements,  such  as  bonded  indebted- 
ness, income,  operating  expenses,  dividends,  each  or  all  with  the  tangible  value  as 
the  base,  which  go  to  make  up  the  value  for  taxation,  always  keeping  on  a  parity 
with  every  other  class  of  property,  for  the  law  contemplates  that  all  assessments 
shall  be  kindred  in  fairness." 

When  the  railroad  runs  through  2  or  more  States  its  value  for  taxing  purposes 
in  Indiana  is  estimated  by  taking  that  part  of  the  value  of  the  entire  road  which 
is  measured  by  the  proportion  of  the  length  in  this  State  to  that  of  the  whole 
road. 

The  total  assessed  value  of  railroad  property  in  1899  was  $153,693,506.  The 
amount  of  taxes  paid  by  railroads  in  the  several  counties  at  the  average  rate  of 
taxation,  estimated  by  State  officials  at  $1.50  per  $100  of  assessed  valuation  in  1899, 
was  $2,305,400,  or  about  one-ninth  of  the  total  taxation  of  the  State. 

The  valuation  of  railroad  property  in  1890,  under  the  old  law,  was  $66,206,295, 
and  as  other  classes  of  property  were  also  assessed  at  lower  values  than  under  the 
new  law,  the  rate  of  taxation  was  higher.  In  1891,  under  the  revised  tax  law,  the 
valuation  of  railroad  property  was  increased  to  $161,039,169,  and  the  tendency 
since  has  been  in  the  direction  of  a  reduction  in  assessed  valuation,  as  a  result  of 
continuous  appeals  on  the  part  of  railroads. 

The  valuation  of  railroad  property  in  1899  was  about  one-half  of  that  of  all  the 
personal  property  of  the  State  and  nearly  18  per  cent  of  that  of  the  real  estate. 


96  INDUSTRIAL    COMMISSION. 

The  present  mode  of  assessing  and  apportioning  ;t  railroad  track  and  "rolling 
stock "  among  counties  and  the  same  difference  in  the  modes  of  assessing  such 
property  and  other  property  had  their  inception  in  this  State  in  1858,  and  have 
continued,  with  modifications  from  time  to  time,  to  the  present. 

It  will  be  observed  that  the  valuation  of  railroads  is  apportioned  among  the 
several  counties  through  which  the  roads  run  in  proportion  to  the  mileage  in 
each.  Counties  containing  railroads  therefore  receive  the  benefit  of  railroad  tax- 
ation according  to  the  values  of  the  road  within  their  borders,  and  to  that  extent 
other  property  is  relieved.  Counties  containing  no  railroads  receive  no  direct 
benefit.  The  valuation  in  1898  ranged  from  nothing  in  Brown  County  to  $9,408,939 
in  Lake  County. 

There  is  one  significant  result  of  the  taxation  of  railroads  in  Indiana  somewhat 
unique  in  the  experience  of  the  States  with  respect  to  railroad  taxation — that  is,  a 
general  public  feeling  that  railroads  are  paying  a  full  proportionate  share  of  the 
taxes  of  the  State.  The  complaint  in  that  regard  is  of  overtaxation  on  the  part 
of  the  railroads  rather  than  undertaxation  on  the  part  of  the  public. 

The  system  does  not  seem  to  be  satisfactory  to  the  railroads  of  the  State,  but  is 
quite  generally  regarded  by  them  as  crude,  cumbersome,  and  expensive  to  both 
State  and  roads  in  its  operation  and  inequitable  and  unjust  in»its  results.  It  is 
contended  on  the  part  of  the  railroads  that  their  property  is  of  such  a  character 
that  its  full  cash  value,  based  not  upon  stable  qualities  alone  but  also  upon 
changeable  fictitious  elements  of  franchise  values  or  earning  power,  is  easily 
determined,  that  no  value  of  any  kind  escapes,  and  that  its  taxation  at  uniform 
rates  with  property  undervalued  and  partially  valued  is  therefore  unequal  and 
excessive  taxation  as  compared  with  other  taxable  property. 

It  appears  that  continual  complaints  are  made  on  behalf  of  railroads,  to  assess- 
ing bodies,  of  excessive  valuation  as  compared  with  other  property,  and  consider- 
able litigation  has  resulted  therefrom.  For  example,  the  Pennsylvania  road, 
assessed  at  $37,000,000  and  taxed  in  the  sum  of  $800,000,  recently  contested  the 
payment  of  taxes  in  45  counties,  securing  affidavits  of  a  large  portion  of  even  the 
assessing  officers  of  the  State  that  real  estate  was  assessed  at  two-thirds  or  some 
portion  only  of  its  cash  value,  while  on  the  other  hand  the  State  officers  procured 
thousands  of  affidavits  that  real  estate  was  assessed  at  substantially  its  cash  value, 
the  same  as  railroad  property.  While,  after  a  time,  the  suit  was  adjusted  upon 
practically  somewhat  of  a  compromise,  it  demonstrated  the  uncertainty  and 
dispute  as  to  the  valuation  of  railroad  property  as  compared  even  with  real  estate. 

From  conversation  with  rail  way  representatives,  we  infer  that  taxation  of  such 

Property  directly  by  the  State,  upon  unit  valuation  or  gross  earnings  at  a  rate 
xed  by  law,  and  with  taxes  payable  to  the  State  treasury,  would  be  more  satis- 
factory to  them,  even  though  the  same  amounts  were  levied  and  paid. 

It  is  claimed  that  if  all  real  estate  and  personal  property,  tangible  and  intangible, 
in  the  State  could  be  as  completely  and  accurately  valued  for  taxation  as  railway 
property  is,  under  the  present  method,  the  rate  of  taxation  would  be  much  less 
than  an  average  of  SI. 50  on  each  $100  of  valuation;  and  that  they,  under  the 
existing  system,  are  compelled  to  pay  this  high  rate  upon  full  valuation  of  all 
their  property,  while  the  real  and  personal  property  of  the  State  is  undervalued 
in  comparison,  and  a  vast  amount  of  it  escapes  the  tax  duplicates  entirely.  In 
short,  they  claim  that  they  are  compelled  by  law  to  endure  in  aggravated  form 
the  evils  inseparable  from  the  general  property  tax  system  applied  to  all  kinds  of 
property,  and  to  pay  excessive  taxes.  On  the  other  hand,  as  already  stated,  the 
tax  officials  of  the  State  contend  that  railroad  property  is  placed  upon  the  dupli- 
cate in  a  manner  just  and  fair  as  compared  with  other  property. 

It  is  contended  that  by  this  system  all  the  property  of  such  companies  is  reached, 
and  the  cause  of  common  complaint  that  it  is  not  taxed  on  the  same  basis  as  the 
property  of  individuals  is  removed. 

The  further  reason  is  given  that,  being  essentially  a  tax  upon  property,  and 
sustained  by  a  long  line  of  Federal  decisions,  it  is  open  to  less  objection  on  con- 
stitutional grounds  than  some  other  methods,  where  interstate  commerce  is 
affected. 

TELEGRAPH,    TELEPHONE,   EXPRESS,   AND  SLEEPING-CAR  COMPANIES. 

By  special  act,  these  companies  are  required  to  file  with  the  auditor  of  State 
annual  statements  showing  in  detail  their  capital  stock,  number  of  shares, 
market  value,  real  and  personal  property  owned  by  them  within  the  State,  mort- 
gages, total  length  of  lines  in  and  out  of  the  State,  and  length  of  lines  within 
each  of  the  counties  and  townships  of  the  State,  length  of  lines  over  which  cars 
run,  etc. 


INDIANA    CORPORATION    TAXES.  97 

If  these  statements  are  deemed  insufficient  by  the  auditor,  he  may  require  such 
further  statements  and  information  as  he  may  desire.  These  statements,  with 
such  other  information  as  the  auditor  requires,  are  laid  before  the  State  board  of 
tax  commissioners,  which  values  and  assesses  the  property  from  such  statements 
and  other  information  as  it  may  obtain,  being  required  to  assess  such  property  at 
its  true  cash  value. 

It  is  provided  that  this  board  shall  first  ascertain  the  true  cash  value  of  the 
property  by  taking  the  aggregate  value  of  all  the  shares  of  capital  stock  in  case 
they  have  a  market  value,  and  in  case  they  have  none  by  taking  the  actual  value 
thereof  or  of  the  capital  of  said  company  in  whatever  manner  the  same  may  be 
divided;  provided  that  in  case  the  whole  or  any  part  of  such  property  is  encum- 
bered by  mortgage,  the  board  ascertains  the  true  cash  value  of  such  property  by 
adding  to  the  market  value  of  the  aggregate  shares  of  stock  or  to  the  value  of  the 
capital  the  aggregate  amount  of  such  mortgage  or  mortgages,  and  the  result  is 
deemed  or  treated  as  the  true  cash  value  of  the  property. 

For  the  purpose  of  ascertaining  the  true  cash  value  of  the  property  within  the 
State  it  next  ascertains,  from  such  statements  or  otherwise,  the  assessed  value  for 
taxation  in  the  localities  where  the  same  is  situated  of  the  several  pieces  of  real 
estate  without  the  State  and  not  specifically  used  in  general  business,  which  said 
assessed  values  are  deducted  from  the  gross  value  of  the  property  as  ascertained. 
It  next  ascertains  and  assesses  the  true  cash  value  of  the  property  of  the  com- 
pany within  the  State  by  taking  the  proportion  of  its  whole  aggregate  value, 
after  deducting  the  assessed  value  of  such  real  estate,  which  the  length  of  the  line 
of  said  company,  in  case  of  a  telegraph  or  telephone  company,  within  the  State 
bears  to  the  total  length  of  the  lines  thereof;  and  in  the  case  of  a  palace,  drawing- 
room,  sleeping,  dining,  or  chair  car  company  the  proportion  is  the  proportion  of 
such  aggregate  value,  after  such  deduction,  which  the  length  of  the  lines  within 
the  State  over  which  its  cars  are  run  bears  to  the  length  of  the  whole  lines  over 
which  said  cars  are  run;  and  in  the  case  of  an  express  company  the  proportion  is 
the  proportion  of  the  whole  aggregate  value,  after  such  deductions,  which  the 
length  of  the  lines  or  routes  within  the  State  bears  to  the  whole  length  of  the  lines 
or  routes  of  such  company;  and  such  amount  so  ascertained  is  deemed  the  entire 
value  of  the  property  of  the  company  within  the  State. 

From  the  entire  value  of  the  property  within  the  State,  so  ascertained,  the  board 
deducts  the  assessed  value  for  taxation  of  all  the  real  estate,  structures,  machinery, 
and  appliances  within  the  State  subject  to  local  taxation,  and  the  residue  of  such 
value  is  assessed  to  the  company. 

The  State  board  thereupon  ascertains  the  value  per  mile  of  the  property  within 
the  State  by  dividing  the  total  value  as  above  ascertained,  after  deducting  the 
specific  properties  locally  assessed  within  the  State,  by  the  total  number  of  miles 
within  the  State,  and  the  result  is  deemed  to  be  the  value  per  mile  of  the  property 
of  such  company  within  the  State. 

The  board  thereupon,  for  the  purpose  of  determining  what  amount  shall  be 
assessed  by  it  to  such  company  in  each  county,  multiplies  the  value  per  mile  thus 
ascertained  by  the  number  of  miles  in  each  county  as  reported  in  such  statements 
or  as  otherwise  ascertained,  and  the  result  thereof  is  certified  to  the  auditor  of 
State,  who  thereupon  certifies  the  same  to  the  auditors,  respectively,  of  the  several 
counties  through  which  the  line  extends,  and  such  auditors  apportion  the  amount 
certified  for  their  counties,  respectively,  among  the  several  minor  taxing  districts 
over  which  said  lines  or  routes  extend  in  proportion  to  the  length  of  lines  in  such 
districts. 

To  enable  the  county  officers  to  properly  apportion  the  assessment,  they  are 
authorized  to  require  the  agents  of  such  companies  to  report  to  them,  under  oath, 
the  length  of  the  lines  in  each  township,  and  they  thereupon  add  to  the  value  so 
apportioned  the  assessed  value  of  real  estate  and  personal  property  situated  in  any 
township  and  extend  the  taxes  thereupon  on  the  duplicate  as  in  other  cases. 

The  assessed  valuation  of  these  classes  of  property  in  1898  was  $5,189,324  and  in 
1899  $6,900,239,  which,  at  the  approximate  average  rate  of  $1.50  per  $100,  may  be 
said  to  have  yielded  in  1898  about  $77,839  and  in  1899  about  $103,503. 

BUILDING,   LOAN,   AND  SAVINGS  ASSOCIATIONS. 

By  special  act  in  1897  paid-up  stock  in  these  associations  was  defined  to  be*such 
stock  as  the  owner  shall  have  paid  the  full  face  value  of  at  the  time  of  the  sub- 
scription therefor;  prepaid  stock,  that  upon  which  the  owner  has  paid  any  specific 
sum  in  advance  at  the  time  of  subscription,  leaving  the  balance  necessary  to 
mature  the  same  to  be  paid  by  dividends  declared,  or  stock  on  which  more  than 
six  months'  dues  have  been  paid  in  advance.  All  building  and  loan  associations 


98  INDUSTRIAL    COMMISSION. 

as  such  are  exempted  from  taxation.  Shares  of  stock  on  which  loans  have  not 
been  made  or  advanced  by  the  association,  which  stock  is  paid  up  or  prepaid,  are 
considered  credits  of  the  members,  individually,  and  listed  by  and  assessed 
against  them  for  taxation  as  other  property. 

RATE  OF   TAXATION. 

The  value  of  all  property  being  placed  upon  the  duplicates  of  the  several  coun- 
ties, the  State  tax  is  apportioned  among  the  counties  and  all  taxes — State,  county, 
township,  or  city — are  mingled  and  levied  upon  this  valuation. 

The  State  commissioners  endeavor  to  equalize  the  valuations  of  the  property 
in  the  several  towns,  cities,  townships,  and  counties  as  fixed  by  local  assessors, 
and  its  proceedings  show  that  the  valuation  of  an  occasional  county  is  increased 
or  lowered  by  a  small  percentage,  as  the  appearance  of  the  rolls  may  suggest,  no 
personal  inspection  of  the  property  in  the  counties  being  made  by  the  board. 

THE  INDIANA  SYSTEM. 

The  Indiana  system,  as  it  is  designated  in  that  State,  establisHed  by  the  revised 
taxation  law  of  1891,  while  it  has  undoubtedly  resulted  in  the  increase  and 
improvement  of  property  valuation  and  assessment  for  taxation  in  some  respects, 
must  still  be  regarded  as  inefficient  and  inexact  and  exhibiting  the  characteristic 
defects  of  the  general  property  tax,  especially  in  its  application  to  corporate 
property  and  intangible  personalty.  The  great  burden  of  taxation  is  still  upon 
real  estate,  relieved  somewhat  by  the  increased  valuation  of  corporate  property. 

Recent  legislation  and  the  united,  organized  action  of  assessing  officers  have 
tended  to  produce  a  State  force  of  tax  officials  trained  and  educated  in  the  busi- 
ness of  listing  and  assessing  property,  and  in  this  respect  the  system  is  most 
commendable. 

The  assessment  of  quasi-public  corporations  by  a  State  board  is  also  a  praise- 
worthy feature,  although  the  method  of  valuation,  apportionment,  and  levying 
at  local  rates,  as  a  whole,  can  hardly  be  regarded  as  scientific,  equitable,  or  exact, 
and  is  of  questionable  merit. 

Under  this  method  the  equitable  assessment  of  this  class  of  property  must 
depend  upon  the  exercise  of  discretion  and  judgment  011  the  part  of  the  State 
board  in  attempting  to  make  valuations  accord  with  the  general  valuations  of 
tangible  and  intangible  property  made  by  local  assessors,  with  results  inevitably 
conjectural  and  open  to  contention.  The  system  involves  a  continual  attempt  to 
square  the  unit  rule  of  valuation,  based  on  earning  capacity,  with  the  strictly 
general  property  tax  of  the  State. 

The  same  may  be  said  of  the  assessment  of  other  corporations  by  local  assessors 
and  county  boards.  As  to  values  of  personalty  and  capital  stock  and  franchises, 
there  is  a  wide  latitude  of  judgment,  and  valuation  upon  a  parity  with  property 
in  general  must  depend  upon  the  action  and  shifting  guess  of  local  officials  in 
different  taxing  districts.  Just  taxation  is  difficult  to  attain  through  proportional 
valuation  by  local  assessors. 

Under  these  methods  of  valuation  of  different  classes  of  property,  and  the  appli- 
cation of  "  uniform  rates,"  unequal  taxation  would  seem  to  be  inevitable.  It  is 
difficult  to  conceive  how  the  assessment  of  moneys  and  various  forms  of  credits 
and  securities  at  their  certain  value,  and  the  assessment  of  corporate  property 
upon  the  basis  of  capital  stock,  franchise  values,  and  earning  capacity  in  strict 
accordance  with  the  specific  directions  of  the  law,  can  result  in  anything  but 
excessive  taxation  as  compared  with  general  property.  Equal  taxation  must 
depend  upon  compromise  of  assessing  officers  in  the  valuation  of  various  forms  of 
property;  'upon  the  shifting  judgment  arid  equitable  adjustment  of  individuals. 
Equality  of  taxation  can  not  be  obtained  by  "uniform"  tax  rate  and  unequal 
valuations.  The  natural  tendency  of  these  conditions  here,  as  elsewhere,  is  to 
encourage'  evasion  and  concealment  and  justify  it  in  the  minds  of  taxables. 

As  to  'personal  property  other  than  corporate,  and  especially  the  great  mass  of 
intangible  personalty,  the  condition  is  admittedly  unsatisfactory.  The  invariable 
injustice  and  confusion  still  exists  to  a  greater  or  less  degree,  and  there  appears 
no  reason  to  regard  the  system  as  more  successful  in  preventing  the  inadequate 
and  unequal  valuation  or  the  escape  of  such  property  than  the  same  rigorous 
methods  have  been  in  other  States  under  the  general  property  tax. 

While  the:  laws  governing  property  assessment  and  the  united  action  of  assess- 
ment boards  combine  to  direct  a  careful  and  systematic  search  for  these  classes 
of  property  and  their  assessment  upon  the  rolls,  the  result,  upon  the  whole,  in  this 


TAXATION    IN    INDIANA.  99 

respect  may,  as  in  many  other  States,  be  regarded  as  a  travesty  on  "taxation  of  all 
property  at  its  true  cash  value  at  a  uniform  rate." 

While  the  proceedings  of  the  State  board  of  tax  commissioners  and  conferences 
of  such  board  and  county  assessors  show  throughout  that  the  complete  uniform 
assessment  of  all  property  at  its  true  cash  value  is  clearly  understood  to  be  the 
purpose  of  the  law,  it  is  very  evident  that  assessors  come  far  short  of  the  attain- 
ment of  that  purpose  in  actual  practice,  and  that  the  result  is  still  uncertainty, 
doubt,  inequality,  and  evasion  of  taxation. 

While  there  are  manifestly  many  good  features  in  the  Indiana  tax  system,  so 
called,  which  perhaps  may  be  regarded  as  the  most  effectual  in  its  application  of 
those  of  the  States  where  the  general  property  tax  prevails  to  the  same  extent, 
it  still  appears  to  come  far  short  of  establishing  the  correctness  or  practicability 
of  that  system  or  the  vindication  of  the  methods  employed  to  facilitate  the  just 
taxation  of  corporate  property  and  intangible  personalty. 

We  find  among  public  officials  and  citizens  the  same  allegations  and  complaints 
common  in  other  States  as  to  ineffective  enrollment  and  valuation  of  intangible 
property. 

In  the  conference  of  the  State  board  of  tax  commissioners  and  county  assess- 
ors of  1900  a  prominent  tax  official  said,  among  other  things,  that  much  personal 
property  of  inhabitants  of  Indiana  held  outside  of  the  State  escapes  taxes,  it 
being  difficult,  if  not  impossible,  to  go  beyond  the  return  of  the  taxpayer.  Refer- 
ring to  the  ordinary  debts  and  demands,  accounts  and  bills,  and  notes,  he  says: 
"  These  classes  are' singularly  elusive,  and  the  difficulty  in  securing  their  return 
for  taxation  has  proved  so  far  insurmountable  to  legislators.  As  the  law  now 
stands,  the  taxing  officers  through  the  carelessness,  neglect,  or  defective  memory 
of  many  taxpayers  are  certainly  unable  to  procure  a  very  large  proportion  of 
personal  property  in  these  classes.  The  fact  that  personal  property  bears  less  than 
27  per  cent  of  the  burden  of  taxation  in  Indiana  is  due  largely  to  property  of 
these  classes,  which  in  some  way  or  other  manages  to  escape  taxation.  It  is  prob- 
ably true  that  the  personal  property  in  the  State  of  Indiana  equals  or  exceeds  the 
value  of  the  real  estate  and  improvements,  but  how  to  find  it  and  how  to  tax  it 
are  still  questions  for  legislators." 

And  another  prominent  State  official,  in  the  same  proceedings,  after  reference 
to  the  action  of  the  convention  looking  to  enactment  of  still  more  searching  stat- 
utes for  the  discovery  and  assessment  of  property,  says: 

li  The  personal-property  valuation  of  the  State  in  1899  was  practically  $300,- 
000,000.  The  reports  of  the  banks  at  the  time  in  Indiana  show  one-fifth  of  this 
amount  was  on  deposit  due  to  individuals.  It  is  unjust  to  corporations  that  may 
be  taxed  faithfully,  it  is  unjust  to  farmers  whose  lands  are  listed  in  accordance 
with  law,  that  the  statutes  do  not  give  more  powers  of  investigation  to  the  assess- 
ing officers,  and  with  the  legislation  that  I  ani  sure  the  experience  of  this  conven- 
tion will  recommend,  the  sequestration  of  personal  property  will  be  unearthed  and 
the  volume  of  personal  property  upon  the  duplicates  be  increased  millions  of 
dollars." 

That  the  value  and  effectiveness  of  other  methods  of  taxing  railroad  property 
and  that  of  other  public  corporations  is  appreciated  by  the  taxing  officers  of  this 
State  is  shown  by  the  statement  pf  the  auditor  of  State  in  an  address  to  the 
State  board  of  tax  commissioners  and  county  assessors  in  the  conference  of  1900, 
who,  after  referring  to  the  assessing  of  railroad  and  other  corporate  property  and 
sharing  in  the  burdens  of  not  only  State  but  local  government,  says:  "  If  the  end 
could  have  been  seen  from  the  beginning,  a  franchise  tax  on  railroads  would  have 
been  a  blessing  to  the  State.  It  should  always  be  remembered  that  in  the  organ- 
ization of  corporations,  the  legislature  acting  for  the  people  speaks  them  into 
being.  The  people  never  lose  their  identity.  The  corporation  is  a  supplicant. 
The  humblest  citizen  is  given  a  right  in  the  organization  of  the  largest  corpora- 
tion. I  believe  that  always  and  everywhere,  when  a  franchise  is  given  a  railroad, 
-the  public  treasury  should  receive  a  per  cent  on  the  gross  receipts.  In  this  State 
we  tax  insurance  companies  3  per  cent  on  net  receipts,  and  this  with  the  collateral 
fees  gives  to  the  general  fund  of  the  State  nearly  a  quarter  of  a  million  of  dollars 
annually.  These  public  utilities  are  creatures,  so  far  as  vested  rights  are  con- 
cerned, of  the  people.  And  if  the  State  shared  in  the  gross  revenue,  the  day  would 
come  when  the  State  levies  of  direct  taxes  could  be  materially  reduced  if  not 
altogether  done  away  with." 

The  same  officer  again  says:  "  The  franiers  of  the  law  in  1891  not  only  were  wise 
in  arriving  at  the  methods  and  the  basis  of  assessing  corporate  property,  but  in  plac- 
ing the  assessment  of  it  almost  wholly  within  the  duty  of  a  separate  board.  County 
and  township  taxing  officers  are  restricted  to  the  property  within  their  limits. 


100 


INDUSTRIAL    COMMISSION. 


It  is  only  the  nonessential  elements  of  corporate  property,  such  as  is  not  an  inte- 
gral portion  of  the  operation  of  corporations,  that  is  touched  upon  by  the  local 
officers.  It  is  the  more  especial  province  of  local  taxing  officers,  so  far  as  vigilance 
is  now  concerned,  to  reach  personal  and  sequestered  property." 

We  quote  the  following  from  an  address  of  the  governor  to  the  conference 
convention  of  the  county  assessors  and  State  tax  commissioners  in  1899: 

' '  The  results  of  the  conference  one  year  ago  were  most  gratifying.  There  was  an 
irifcrease  last  year  in  the  assessment  of  personal  property  of  $10,000,000.  During 
the  six  years  preceding  there  had  been  a  loss  in  the  personal  property  assessment 
in  the  State  of  $11,663,421,  while  during  the  same  period  there  was  an  increase  of 
assessments  upon  real  estate  of  $40,709,018.  There  can  be  no  question  that  if  all 
personal  property  had  been  justly  listed,  there  would  have  been  a  large  increase 
instead  of  reduction.  The  vast  amount  of  intangible  personal  property  that 
escapes  taxation  is  causing  dissatisfaction  among  holders  of  real  estate  and  will 
prove  an  incentive  to  them  to  seek  undervaluation. 

"  The  prevailing  disposition  to  seek  investments  in  intangible  securities,  thereby 
escaping  the  assessor,  not  only  places  a  premium  upon  such  investments,  but 
tends  to  discourage  efforts  to  secure  homes,  the  purchase  of  which  often  incurs 
debt,  thus  imposing  upon  the  home  getter  the  unequal  burden  «f  paying  tax  upon 
more  than  he  possesses,  while  other  investments  escape  altogether. 

"  This  widespread  wrong,  grievous  as  it  may  seem,  does  not  justify  in  any  degree 
undervaluation  of  real  estate.  It  is  your  duty  to  see  that  all  property,  real  or 
personal,  tangible  or  intangible,  is  assessed  at  its  true  cash  value.  Upon  this 
point  there  seems  to  be  a  wide  divergence  of  opinion." 

One  of  the  members  of  the  State  board  of  tax  commissioners  in  the  convention 
of  1899  thus  referred  to  those  who  seek  to  evade  taxation:  "  There  are  many 
men  who  in  all  else  stand  well  in  their  communities,  men  who  would  scorn  to 
beat  a  neighbor  out  of  a  nickel,  but  who  seem  to  look  upon  it  as  a  matter  of 
course  that  a  man  should,  if  he  can,  escape  taxation:  and  they  resort  to  all  sorts 
of  shifts  and  subterfuges,  even  to  perjury  itself,  to  escape  their  just  share  of  the 
burdens  of  the  Government,  without  whose  protection  they  should  have  security 
for  neither  person  nor  property.  These  tax-dodging  gentry  are  not  always  of  the 
under  half  of  society.  Many  of  them  occupy  high  social  positions,  and  are  rated 
as  gilt-edged  in  the  business  world  by  Dun  and  Bradstreet,  while  many  of  them 
also  occupy  front  pews  in  our  houses  of  worship,  and  the  fervor  of  their  appeals 
to  the  Throne  of  Grace  on  Sunday  is  in  no  wise  diminished  by  reason  of  a  hard 
day's  work  in  hiding  their  property  from  the  tax  assessor  on  Saturday." 

These  comments,  together  with  the  property  valuations  elsewhere  referred  to, 
indicate  that  tax  dodgers  are  about  as  numerous  and  elusive  pests  in  Indiana  as 
in  other  States. 

ABSTRACT  OF  TAX  DUPLICATES  FROM  1878  TO  1899. 

Statement  showing  the  total  taxable  property  of  the  State,  real  and  personal, 
including  railroad  and  other  corporate  property,  for  the  years  1878  to  1899, 
inclusive. 


Year. 

True  value 
of  lands. 

True  value 
of  improve- 
ments. 

True  value  of 
lands  and  im- 
provements. 

True  value 
of  Jots. 

True  value 
of  improve- 
ments. 

1878                                    

$389,  839,  375 

$73,  545,  220 

$463,384,595 

$94,242,671 

$81,200,179 

1879  

384,  029,  696 

74,  958,  342 

458,  988,  038 

93,  294,  796 

84,554,929 

1880                                           .     . 

326,810,513 

62,  721,  296 

389,531,809 

72,  056,  594 

71,873,971 

1881  

329,531,570 

63,481,830 

393,  013,  400 

72,819,733 

73,991,981 

1882        

331,696,565 

65,017,573 

396,  714,  138 

73,  342,  409 

73,078,370 

1883 

330,  524,  836 

65,  805,  368 

396,  330,  204 

73,421,963 

77,  575,  270 

1884  

332,  585,  700 

74,  542,  113 

407,  127,  813 

73,  806,  902 

84,  965,  539 

1885                             

330,  740,  778 

73,  787,  101 

404,  527,  879 

73,  373,  104 

88,  620,  998 

1886 

316,  425,  125 

63,  478,  905 

379,904,030 

70,  868,  426 

81,323,090 

1887                        

315,  588,  490 

66,  050,  246 

381,638,736 

71,027,930 

82,  658,  119 

1888                                             

309,  457,  303 

64,  926,  562 

374,  383,  865 

75,  936,  688 

88,  906,  633 

1889 

307  834  605 

65,  439,  284 

373,  273,  889 

76,  515,  627 

93,  997,  381 

1890                               

308,  173,  414 

69,  102,  918 

377,  276,  332 

76,585,557 

100,  075,  855 

1891 

450,186,112 

79,351,475 

529,  537,  587 

140,  902,  050 

128,  160,  686 

1892                  

449,  544,  057 

81,  553,  811 

531,097,868 

141,133,709 

136,  635,  393 

1893                                               .   - 

453,  895,  136 

84,  708,  043 

538,  603,  179 

147,  890,  880 

146,  799,  593 

1894 

454  131  203 

86,  544,  952 

540,  676,  155 

149,  263,  802 

153,441,643 

1895                         

455,  733,  569 

80,  354,  330 

536,  087,  899 

149,  585,  197 

150,  319,  353 

1896 

453,881,049 

81,864,942 

525,  745,  991 

151,043,597 

157,970,527 

1897        

455,  443,  089 

83,  471,  438 

538,  914,  527 

151,351,899 

162,  384,  354 

1898                                         

452,891,523 

84,  869,  118 

537,  760,  641 

151,662,796 

168,  203,  319 

1899 

449  561,158 

84,  692,  005 

534,  253,  163 

162,741,375 

163,371,084 

TAXATION    IN    INDIANA. 


101 


Statement  showing  the  total  taxable  property  of  the  State,  real  and  personal, 
including  railroad  and  other  corporate  properties,  etc. — Continued. 


_ 
Year. 

True  value  of 
lots  and  im- 
provements. 

True  value 
of  personal 
property. 

True  value 
of  telephone, 
telegraph, 
express,  and 
sleeping-car 
property. 

True  value 
of  railroad 
property. 

Total  true 
value  of  tax- 
ables. 

1878... 

$175,  442,  850 

$198,  333,  157 

$130  346 

$37,  629,  6l4 

$874  921  062 

1879. 

177,  849,  725 

208,  585,  821 

38  019  926 

883  443  510 

1880 

144  930  565 

192  382  202 

38  442  941 

764  287  517 

1881  

148,811,714 

220,  858,  701 

43  336  140 

804  019  935 

1882 

146  713  304 

213  889  952 

47  885  398 

804  910  267 

1883 

150  997  233 

212  761  052 

53  480  932 

920  569  421 

1884  

158,  772,  441 

218,  391,  019 

55  057  687 

839  348,960 

1885 

161  994  102 

217  004  098 

54  983  513 

837  770  099 

1886  

152,  191,  516 

221,  730,  233 

395,  802 

55,244  820 

809,466  401 

1887 

153  686  049 

224  399  516 

434  985 

61  314  078 

821  473  364 

1888 

164  843  321 

227  263  502 

584  963 

64  211  717 

831  287  368 

1889  

171  980  268 

234,  413,  787 

680  589 

63  134  933 

842  016  406 

1890 

176  661  412 

236  831  076 

698  672 

66  206  295 

852  673  038 

1891  

269  062,736 

293,  745,  534 

1,  871,  012 

161,  039,  169 

,  255,  256,  038 

1892  ... 

277  769  102 

295  914  156 

1  686  831 

160  970  108 

267  438  065 

1893 

294  690  473 

304  581  768 

5  058  780 

159  376  050 

302  310  270 

1894  

302  705  445 

291  085,815 

3  513  965 

157  125  035 

,  295,  106,  415 

1895 

299  904  550 

288  381  711 

5  206  793 

156  469  578 

286  050  531 

1896  

309  014,124 

287,  091,  096 

5,  953,  791 

154,  836,  265 

,292,641,177 

1897  . 

313  736  253 

282  082  113 

6  406  405 

154  825  758 

1  295  965  056 

1898  

319,  866,  115 

295,032.580 

5,  189,  324 

153,  659,  348 

1,311,508,008 

1899 

326  112  409 

315  540  675 

4  695  690 

153  693  506 

1,  334,  295,  443 

ANALYSIS   OF  ABSTRACT. 

The  purpose  of  the  reformed  tax  law  of  1891,  as  already  shown,  was  to  bring 
about  a  more  complete  and  equal  valuation  and  assessment  of  property. 

The  results  are  roughly  shown  by  the  foregoing  abstract  of  tax  duplicates  from 
1878  to  1900. 

The  valuation  of  lands  had  gradually  decreased  from  $389,839,375  in  1878  to 

'1,173.414  in  1890.  It  was  in  1891  increased  to  $450,186,112,  or  about  50  per 
cent,  subsequently  increased  to  $455,733,569  in  1895,  and  gradually  decreased  to 
$449,561,158  in  1899. 

There  was  a  smaller  increase  in  the  valuation  of  improvements  in  1891  over 
1890  and  no  material  change  during  the  last  few  years,  that  of  1899  being 
$84,692,005.  The  valuation  of  lands  and  improvements  under  the  new  law 
reached  its  maximum  in  1894,  $540,676,155,  varied  a  few  millions  in  subsequent 
years,  and  in  1899  was  $534,253, 163.  The  value  of  lots  and  improvements  increased 
in  1891  over  1890  about  $92,000,000,  to  $269,062,736,  or  more  than  50  per  cent,  and 
has  since  increased  to  $326,112.409. 

The  valuation  of  personal  property  increased  under  the  new  law  from  $236,- 
831,076  in  1890  to  $293,745,534  in  1891,  or  about  25  per  cent,  with  varying  changes 
in  subsequent  years,  until  in  1899  it  reached  $315,540,675,  an  increase  that  year  of 
substantially  $19,500,000. 

The  increase  of  the  valuation  of  all  real  estate  in  1891  over  that  of  1890  was 
$244,662,579,  or  44.1  per  cent.  The  increase  of  the  valuation  of  personal  property 
in  1891  over  that  of  1890  was  $56,914,458,  or  about  24  per  cent.  The  valuation  of  all 
real  estate  in  1890  was  $553,937,744,  and  of  personalty  $236,831,076.  the  personalty 
being  about  42  per  cent  of  the  real  estate.  In  1899  the  valuation  of  real  estate 
was  $860,365,572  and  that  of  personalty  $315,540,675,  the  personalty  being  about 
36.6  per  cent  of  the  real  estate. 

It  will  thus  be  seen  that  the  ratio  of  personalty  to  real  estate  was  greater  in 
1890  than  in  1899,  and  yet  it  is  a  matter  of  common  knowledge  that  personal  prop- 
erty has  greatly  increased  since  1890. 

The  assessment  of  telegraph,  telephone,  express,  and  sleeping  car  companies 
increased  from  $698,672  in  1890  to  $1,871,012  in  1891,  and  reached  about  $5,000,000 
in  1893.  The  valuation  of  railroad  property  increased  from  $66,206,295  in  1890 
to  $161,039,169  in  1891,  or  nearly  150  per  cent,  and  the  tendency  has  since  been 
downward  until  1899.  The  increase  in  the  assessment  of  public-service  corpora- 
tions was  proportionately  greater  than  that  of  real  property,  and  the  latter  much 
greater  than  that  of  personal  property.  The  increase  in  the  valuation  of  all  tax- 
ables  was  from  $852,673,038  in  1890  to  $1,255,256.038  in  1891,  and  in  1899  the  valua- 
tion reached  $1,334.295.443. 


102  INDUSTRIAL    COMMISSION. 

This  analysis  does  not  disclose  any  remarkable  reformation  in  the  relative 
assessment  of  real  and  personal  property  under  the  law  of  1891.  It  immediately 
increased  the  total  valuation  of  the  State  $402,583,000,  or  nearly  50  per  cent. 

This  increase  was  apportioned  among  the  different  classes  of  property  as  follows: 

Increase. 

Lands. §142,021,698 

Improvements 10, 248, 557 

Lbts 64,316,493 

Improvements 28 , 084, 831 

Total  increase  of  real  estate 244,662,579 

Personal  property 56,914.458 

Telegraph,  telephone,  express,  and  sleeping  car  companies 1, 172, 340 

Railroad  property 94, 832, 874 


MICHIGAN. 
GENERAL  TAXATION  SYSTEM. 

The  constitution  of  Michigan  imposes  upon  the  legislature  the  duty  to  provide 
a  uniform  rule  of  taxation,  except  upon  property  paying  specific  taxes;  and  it  pro- 
vides that  taxes  shall  be  levied  upon  such  property  as  shall  be  prescribed  by  law, 
and  that  all  assessments  shall  be  on  property  at  its  cash  value. 

Following  these  constitutional  provisions,  the  legislature  at  the  time  of  the 
formation  of  the  State  government  enacted  laws  providing  a  general  system  of 
taxation  of  the  property  of  the  State  by  two  separate  and  distinct  methods,  desig- 
nated as  "  general  tax ''  and  •'  specific  tax.'' 

The  most  important  part  of  the  tax  system  is  the  general  tax  on  property.  The 
laws  first,  in  a  general  way,  provide  that  all  property,  real  and  personal,  within 
the  jurisdiction  of  the  State  not  expressly  exempted  'shall  be  subject  to  taxation. 

They  provide  for  the  annual  assessment  of  all  property  in  the  State,  including 
corporate  property,  with  certain  exceptions,  such  corporate  property  to  be  assessed 
to  the  corporation  in  its  name  as  to  a  natural  person,  in  the  several  townships, 
villages,  and  cities  of  the  State  by  the  supervisors  of  the  several  townships  and 
wards,  or  in  villages  and  cities  where  provision  is  made  in  the  acts  of  incorpora- 
tion or  charter  for  some  other  assessing  officer,  then  by  such  other  assessing 
officer.  The  general  property  tax  assessment  is  made  by  local  assessors  for  local 
and  State  purposes,  the  amount  of  State  taxes  each  year  being  apportioned  by  the 
auditor-general  of  the  State  among  the  several  counties  in  proportion  to 'the 
valuation  of  the  taxable  property  therein,  and  this  is  again  reapportioned  by 
the  board  of  supervisors  of  each  county  among  the  several  townships  and  wards 
and  levied  in  the  same  manner. 

This  system  of  general  property  taxation,  adopted  at  an  early  date,  when  the 
greater  portion  of  the  property  of  the  State  consisted  of  real  estate,  although 
somewhat  changed  and  supplemented  in  details  from  time  to  time  by  the 
attempts  of  different  legislatures  to  adapt  it  to  the  needs  of  a  rapidly  growing 
State,  continues  to  the  present  time,  and  now,  in  many  respects,  appears  crude  and 
antiquated  under  the  changed  conditions  of  industrial  development,  and  ill 
adapted  to  the  just  and  equitable  taxation  of  the  enormously  increased  amount 
of  personal  property  in  the  State,  which  is  largely  in  corporate  form. 

Through  this  system  substantially  all  the  real  property  of  the  State  is  assessed 
upon  the  rolls  in  the  various  localities,  but  the  mingling  of  local  and  State  taxes 
naturally  results  in  systematic  attempts  by  local  assessors  to  secure  advantage 
for  their  respective  localities  by  a  reduced  property  valuation,  notwithstanding 
the  constitution  and  statutes  impose  upon  them  the  duty  of  assessing  property  at 
its  true  cash  value.  A  comparatively  small  portion  of  the  personal  property, 
individual  and  corporate,  is  assessed.  Intangible  personalty,  especially,  in  great 
part  escapes. 

From  statistics  of  assessment  and  taxation  gathered  by  the  auditor-general 
from  the  different  counties  of  the  State  and  published  in  his  report  for  1870,  it 
appears  that  the  cash  value  of  all  real  and  personal  property  upon  the  tax  rolls 
was  a  little  more  than  three  times  the  assessed  valuation  of  the  same  property. 
While  since  that  time  no  such  systematic  attempt  to  determine  the  relation  of 
assessed  valuation  to  cash  value  of  property  has  been  made,  it  is  probablyjsafe 
to  assume  that  the  same  difference  still  exists. 

GENERAL  PROPERTY  TAX  EXEMPTIONS. 

The  State  subjects  to  taxation  "all  property,  real  and  personal,  within  the 
jurisdiction  of  the  State  not  expressly  exempted." 

The  exemptions  are  of  three  kinds: 

First.  Property  used  not  for  gain,  but  for  purposes  which  it  has  been  thought 
well  to  cherish  and  encourage. 

103 


104  INDUSTRIAL    COMMISSION. 

Second.  Property  of  corporations  exempt  by  reason  of  paying  specific  taxes. 

Third.  Certain  exemptions  made  with  a  design  to  prevent  the  burden  of  taxa- 
tion from  being  unduly  heavy  upon  those  not  able  to  bear  it  without  undue 
hardship. 

The  real  property  expressly  exempted  consists  of  all  public  property;  the  real 
estate  of  libraries,  benevolent,  charitable,  scientific,  and  educational  institutions 
incorporated  under  the  laws  of  the  State;  that  of  all  religious  societies,  agricul- 
tural societies,  and  military  organizations,  and  corporate  property  exempt  by 
reason  of  specific  tax. 

Personal  property  expressly  exempt  consists  of  that  of  societies  above  enumer- 
ated; shares  in  building  and  loan  associations,  and  mortgages  and  other  securities, 
held  by  such  associations;  pensions  receivable  from  the  United  States:  so  much  of 
credits  as  shall  equal  the  amount  of  debts  owed;  the  library,  family  pictures,  and 
one  sewing  machine  of  each  individual  or  family,  and  wearing  apparel  of  each 
individual;  household  furniture,  furnishings,  and  fuel  of  each  householder  not 
exceeding  $500,  and  personal  property  in  connection  with  his  business  to  the 
value  of  $200;  the  working  tools  or  any  mechanic,  not  exceeding  $100;  all  mules, 
horses,  and  cattle  not  over  1  year  old,  and  sheep  and  swine  not  over  6  months 
old,  and  all  domestic  birds. 

PERSONAL  PROPERTY. 

For  the  purpose  of  taxation,  personal  property  includes  substantially  every- 
thing of  that  nature,  tangible  and  intangible,  not  specially  exempted  by  law,  and 
is  particularly  classified  in  special  statutes. 

Property  actually  invested  in  business  outside  the  State  is  not  included.  Debts 
Tare  deductible  from  credits  only,  and  the  balance  of  credits  of  every  kind  is  tax- 
able. Shares  in  foreign  corporations  owned  by  citizens  are  taxable  to  the  owners. 

While  the  law  does  not  refer  in  express  terms  to  the  taxation  of  notes  and  mort- 
gages, they  are  regarded  as  taxable  to  the  owner  under  the  provisions  for  taxa- 
tion of  credits  and  other  personal  property  not  expressly  enumerated.  Such 
property,  however,  has  almost  entirely  escaped  taxation  under  the  existing  system. 
The  State  tax  commission  is,  however,  making  special  effort  throughout  the  State 
to  bring  such  property  upon  the  tax  rolls. 

In  1891  a  law  was  enacted  providing  that  a  mortgage  or  other  obligation  secured 
by  lien  on  real  estate  should  be  treated  as  an  interest  in  real  estate  for  the  pur- 
poses of  taxation;  that  the  value  of  property  less  the  value  of  the  seem ity  should 
be  taxed  to  the  owner  and  the  value  of  the  security  assessed  separately  to  the 
owner  thereof  in  the  assessing  district  where  the  property  so  affected  was  located . 
The  provision  was  not  thoroughly  enforced,  and  in  practice  the  taxes  on  both  land 
and  mortgage  were,  by  contract  between  the  parties,  paid  by  the  owner  of  the 
land.  Confusion  and  dissatisfaction  resulted,  and  the  law  was  repealed  in  1893. 

LISTING. 

Rigorous  provisions  for  the  listing  of  personal  property  for  taxation  have  been 
upon  the  statute  books  for  many  years,  but  have  in  practice  been  ignored. 

The  assessment  of  personalty  by  local  assessors  has  been  almost  entirely  by 
estimate  without  statement  of 'taxpayers  and  has  been  characterized.by  extreme 
laxity  and  neglect,  resulting  in  low,  unequal  assessment  of  a  portion  only  of  tangible 
personalty  and  the  escape  of  substantially  all  intangible  property.  At  a  recent 
session  of  the  State  legislature,  however,  the  laws  constituting  the  listing  system 
were  amended  in  important  particulars  and  a  vigorous  effort  has  since  been  made 
by  the  board  of  State  tax  commissioners,  hereafter  referred  to,  to  enforce  them. 

By  the  change  of  the  word  "may  "  to  " shall"  the  duty  of  the  local  assessor  to 
require  a  statement  under  oath  from  every  "  person  of  full  age  and  sound  mind'' 
whom  he  believes  to  have  property  not  exempt  from  taxation  is  made  mandatory. 
The  assessor's  and  the  taxable's  duties  in  this  regard  are  minutely  defined.  Every 
resident  owner  of  the  State,  individual  or  corporation,  is  required  to  give  a  care- 
fully detailed  list  of  all  personalty,  tangible  and  intangible;  and  severe  penalty,  by 
fine  qr  imprisonment,  is  imposed  for  willful  neglect  or  refusal  to  make  out  such 
statement  or  for  answering  questions  falsely. 

The  assessing  officers  or  members  of  the  State  board  are  especially  empowered 
to  examine  under  oath  any  other  person  thought  to  have  knowledge  of  the  prop- 
erty of  such  negligent  taxable  concerning  such  property,  and  arbitrarily  to  assess 
such  amount  of  real  or  personal  property  as  they  may  deem  reasonable  and  just. 

An  interesting  case  bearing  iipon  the  legal  effect  of  the  intentional  undervalu- 
ation and  omission  of  property  by  assessors  in  making  up  the  assessment  rolls, 


MICHIGAN    CORPORATION    TAXES.  105 

illustrating  the  infirmities  of  the  general  tax  system,  was  recently  decided  by  the 
supreme  court  of  the  State.  (Auditor-General  v.  Pendill  et  al.,  decided  March  27, 
1900.) 

Where  the  evidence  showed  an  intentional  omission  of  personal  property,  an 
intentional  undervaluation  of  a  large  part  of  the  personal  and  real  estate,  not 
accidental,  not  inadvertent,  but  known  and  intentional,  the  entire  assessment 
roll  was  held  to  be  void. 

The  listing  of  property  of  corporations  will  be  referred  to  in  connection  with 
the  subject  of  corporate  taxation. 

BOARD  OF  STATE  TAX  COMMISSIONERS. 

In  1899  a  law  was  passed  creating  a  board  of  State  tax  commissioners  to  exer- 
cise supervisory  control  over  local  tax  officers.  It  was  vested  with  arbitrary  power 
and  authority  for  the  enforcement  of  the  tax  system  of  the  State,  and  charged 
with  the  duty  of  investigation  and  recommending  future  legislation  upon  the  sub- 
ject of  taxation. 

The  board  consists  of  three  members,  appointed  by  the  governor,  and  the  full 
term  of  service  is  6  years.  The  members  are  given  access  to  the  records  and  files 
of  the  State  and  of  counties,  townships,  and  municipalities,  the  right  to  examine 
the  books  and  papers  of  any  person  or  corporation  owning  property  liable  to 
assesssment.  and  the  power  to  summon  and  examine  witnesses.  It  is  required 
to  exercise  supervision  over  all  the  assessing  officers  of  the  State,  and  to  take 
such  measures  as  will  secure  the  enforcement  of  the  tax  laws,  "  to  the  end  that  all 
the  properties  of  the  State  liable  to  assessment  for  taxation  shall  be  placed  upon 
the  assessment  rolls  and  assessed  at  their  actual  cash  value." 

The  duty  is  imposed  upon  it  to  confer  with  and  advise  assessing  officers  as  to 
their  duties,  and  to  institute  proper  proceedings  to  enforce  the  penalties  and  lia- 
bilities imposed  upon  public  officers,  officers  of  corporations,  and  individuals 
failing  to  comply  with  the  laws;  to  receive  complaints  and  correct  errors  and 
irregularities:  to  visit  each  county  at  least  once  a  year,  to  hear  complaints  con- 
cerning the  laws,  collect  information  as  to  its  workings,  and  see  that  officers  com- 
ply with  the  law,  that  violations  are  punished,  and  that  proper  suggestions  as  to 
amendments  and  changes  are  made;  to  ascertain  the  assessed  and  equalized  valua- 
tion of  all  property  listed  for  taxation  throughout  the  State;  to  inquire  into  and 
ascertain  the  valuation  of  the  property  of  corporations  paying  specific  taxes,  and 
the  actual  rate  of  taxation  based  upon  property  valuation;  to  investigate  the  reve- 
nue laws  and  systems  of  other  States,  and  with  the  aid  of  all  information  and 
experience  obtained,  recommend  to  the  legislature  at  each  session  such  amend- 
ments and  changes  of  the  revenue  laws  of  the  State  as  may  seem  proper  to  remedy 
injustice  and  irregularity  and  facilitate  the  assessment  and  collection  of  public 
revenue:  to  report  to  the  legislature  at  each  regular  session  specifically  the  true 
valuation  of  the  properties  of  corporations  paying  specific  taxes,  and  rates  actually 
paid  thereon,  and  the  true  valuation  of  all  other  properties  of  the  State,  and  the 
rate  of  taxation  thereon,  to  the  end  that  the  legislature  may  have  the  requisite 
information  to  rearrange  the  rates  or  system  of  taxation  on  such  property,  so  that 
all  properties  may  be  uniformly  taxed. 

This  board  is  also  charged  with  the  inspection  of  the  several  assessment  rolls  of 
the  State,  and  empowered  to  direct  such  changes  and  additions  as  may  be  neces- 
sary to  compliance  with  the  laws  and  the  correct  taxation  of  all  property.  It  is 
also  given  power  to  tax  upon  the  current  rolls  in  any  year  property  that  has  been 
shown  to  have  been  omitted  in  previous  years  for  the  tax  of  the  omitted  period. 

BANKS. 

The  real  estate  of  all  banks  organized  within  the  State  is  assessed  to  such  banks 
where  such  property  is  located.  All  shares  in  such  banks  are  assessed  at  their 
cash  value  to  their  "owners  in  the  place  where  the  bank  is  located,  except  that 
shares  owned  by  a  person  residing  in  the  same  county  but  in  a  different  township 
or  city  are  assessed  where  such  owner  resides. 

The  cash  value  of  the  real  estate  assessed  separately  to  such  banks  is  deducted 
from  the  assessed  value  of  shares  of  stock.  When  the  stock  of  a  bank  is  not  regu- 
larly quoted  in  the  market,  the  value  of  shares  may  be  determined  by  dividing  the 
sum  of  the  paid-up  capital  arid  surplus  by  the  number  of  shares,  deducting  from 
each  a  proportionate  part  of  the  cash  value  of  realty  taxed  to  the  bank. 

The  real  estate  and  shares  so  valued  are  taxed  at  local  rates  with  other  assessed 
property. 

Bank  deposits  are  taxable  by  law  to  depositors  or  owners  and  not  to  the  banks. 
In  practice,  however,  bank  deposits  have  not  been  taxed  in  this  State. 


106  INDUSTRIAL    COMMISSION. 

For  convenience  in  collecting  these  taxes  the  cashier  of  the  bank  is  made  the 
agent  of.  the  shareholders,  the  official  duty  being  imposed  upon  him  to  pay  the 
taxes  assessed  upon  such  shares  of  stock  when  called  upon  to  do  so,  and  charge 
the  amount  so  paid  against  the  shares  of  stock  so  taxed. 

The  cashier  is  required  each  year  to  file  with  the  clerk  of  the  county  where  such 
bank  is  located  a  list  of  the  names  of  the  stockholders,  with  the  amount  of  stock 
held  by  each  and  their  respective  residences,  and  a  heavy  penalty  is  imposed  for 
wjllful  neglect  to  perform  this  duty. 

Thereupon  the  county  clerk  is  required  to  notify  the  assessing  officer  of  each 
township  of  the  names  of  each  shareholder  residing  therein  and  the  amount  of 
stock  held. 

The  principal  or  accounting  officer  of  every  bank  whose  capital  is  not  repre- 
sented by  shares  of  stock,  and  every  private  banker,  broker,  or  stock  jobber  is 
required  each  year  to  give  to  the  local  assessor  a  sworn  statement  showing: 

First.  The  amount  of  money  on  hand  and  in  transit. 

Second.  The  amount  of  funds  in  other  hands  subject  to  draft. 

Third.  The  amount  of  checks  and  other  cash  items  not  included  in  above  items. 

Fourth.  The  amount  of  bills  receivable  and  other  credits. 

Fifth.  The  amount  of  bonds  and  stocks  of  every  kind,  except  United  States 
bonds  and  shares  of  capital  stock  held  as  an  investment  or  representing  assets. 

Sixth.  All  other  property  appertaining  to  such  business,  except  real  estate. 

Seventh.  Amount  of  deposits. 

Eighth.  Amount  of  accounts  payable  other  than  deposits. 

Ninth.  Description  and  value  of  real  estate. 

The  aggregate  amount  of  items  7  and  8  are  deducted  from  aggregate  of  1,  2,  3, 
and  4,  and  the  remainder,  if  any,  assessed  as  moneys. 

The  amount  of  the  fifth  item  is  assessed  as  stocks  and  bonds,  the  sixth  as  other 
similar  property,  and  the  whole  makes  up  the  aggregate  personal  assessment,  the 
real  estate  being  assessed  separately. 

The  property  of  banks  being  subjected  to  local  rates  of  taxation  upon  the  basis 
of  valuation  determined  by  the  methods  above  described,  it  follows  that  by  reason 
of  full  valuation  it  is  much  more  heavily  taxed  than  property  in  general,  and  from 
this  excessive  taxation  there  is  no  escape. 

CORPORATIONS  IN  GENERAL. 

Under  the  tax  laws  of  Michigan  a  corporation  whose  property  is  taxable  under 
the  general  law  stands  upon  the  same  footing  as  an  individual.  The  property  of 
both  come  under  the  general  property-tax  system.  The  real  estate  is  assessed 
in  the  name  of  the  corporation  in  the  place  where  located. 

The  law  as  to  the  taxation  of  the  personal  property  of  corporations  is  not  very 
clear,  but  in  a  general  way  it  may  be  said  that  there  is  no  substantial  distinction 
between  the  taxation  of  such  property  and  that  of  individual  owners. 

It  is  specifically  provided  that  "all  corporate  property,  except  where  some  other 
provision  is  made  by  law,  shall  be  assessed  to  the  corporation  as  to  a  natural  per- 
son, in  the  name  of  the  corporation." 

The  provisions  declaring  what  personal  property  for  the  purposes  of  taxation 
shall  include  and  relating  to  exemptions  apply  to  corporate  property  as  well  as  to 
that  of  individuals. 

Under  these  provisions  the  indebtedness  of  either  an  individual,  firm,  or  corpo- 
ration can  be  deducted  only  from  credits;  if  no  credits  are  shown  in  a  statement 
of  such  property  there  is  nothing  from  which  debts  can  be  deducted.  Where  the 
property  of  corporations  is  taxable  to  itself  the  shares  of  stock  are  exempt  from 
taxation  in  the  hands  of  the  owners. 

The  personal  properties  of  all  gas  and  coke  companies,  natural -gas  companies, 
electric-light  companies,  waterworks  companies,  and  hydraulic  companies  are 
assessed  where  the  principal  works  are  located.  The  mains,  pipes,  and  wires  of 
such  companies  laid  in  or  along  roads,  lanes,  streets,  or  alleys  are  assessed  as 
personalty  where  the  same  are  laid  or  placed.  The  personal  property  of  street 
railroad,  plank  road,  cable  or  electric  road  or  transportation  companies,  bridge 
companies,  and  all  other  companies  except  those  paying  specific  taxes,  are  assessed 
where  the  principal  office  of  the  company  is  located,  and  the  track,  road,  or 
bridge  of  any  such  company  is  held  to  be  personal  property  and  assessed  where 
the  same  is  located,  placed,  or  laid. 

Formerly  street-railway  companies  were  taxed  at  the  rate  of  one-half  of  1  per 
cent  on  the  whole  amount  of  capital  paid  in  on  the  capital  stock  in  lieu  of  all  other 
taxes,  but  this  law  was  repealed  in  1882. 

The  property  of  many  classes  of  corporations  is  specifically  taxable  to  the  cor- 
porations themselves  by  provisions  in  the  acts  under  which  they  are  incorporated. 


MICHIGAN    COEPOKATION    TAXES.  107 

The  law  for  the  incorporation  of  manufacturing  companies  contains  the  follow- 
ing provisions:  "All  corporations  formed  or  existing  under  this  act  shall  be  liable 
to  be  assessed  for  all  real  and  personal  estate  held  by  them  in  this  State  at  its  true 
value,  and  shall  pay  thereon  a  tax  for  township,  village,  city,  county,  and  State 
purposes  the  same  as  other  real  and  personal  estate,  and  such  tax  shall  be  assessed, 
collected,  and  paid  in  the  same  manner  as  other  taxes  on  real  and  personal  estate 
are  required  to  be  assessed,  collected,  and  paid:  Provided,  That  nothing  herein 
contained  shall  authorize  the  taxing  of  the  capital  stock  of  such  corporations 
as  such  capital  stock." 

For  the  purpose  of  assisting  the  local  assessor  in  determining  the  valuation  of 
corporate  property,  each  corporation  taxable  under  the  general  law  is  required  to 
make  and  deliver  to  him  annually  a  sworn  statement  setting  forth: 

First.  The  name  and  location  of  the  company. 

Second.  The  amount  of  capital  stock  authorized  and  the  number  of  shares  into 
which  it  is  divided. 

Third.  The  amount  of  capital  actually  paid  in. 

Fourth.  The  market  value  of  the  stock,  or,  if  it  has  no  market  value,  then  its 
actual  value. 

Fifth.  The  cash  value  of  all  personal  property,  giving  each  kind  separately  as 
far  as  practicable. 

Sixth.  The  total  of  all  bona  tide  indebtedness,  except  indebtedness  for  current 
expenses,  excluding  from  such  expenses  all  amounts  paid  for  the  purchase  or  bet- 
terment of  said  property. 

Seventh.  A  description  and  value  of  real  estate. 

The  amount  of  the  seventh  item  is  deducted  from  the  amount  of  the  fourth 
item,  and  the  balance,  if  any,  is  assessable  as  the  cash  value  of  the  personal  estate. 
The  amount  of  the  sixth  item  is  deducted  from  the  amount  of  the  fifth  item,  which 
is  held  to  refer  to  credits,  and  the  balance,  if  any,  is  assessed  as  personal  property. 

Special  statements  are  required  of  navigation  or  transportation  companies  as 
to  vessel  and  marine  property. 

If  any  corporate  officer  makes  or  verifies  any  false  statement  to  an  assessing 
officer,  the  intention  or  effect  of  which  is  to  escape  taxation,  such  person  is 
declared  guilty  of  a  misdemeanor  and  is  punishable  by  fine  or  imprisonment. 

Severe  penalties  are  by  law  imposed  for  neglect  or  refusal  to  make  true  and 
correct  sworn  statements.  The  assessor  or  board  of  State  tax  commissioners 
in  certain  cases  may  examine  under  oath  any  person  believed  to  have  knowledge 
of  such  property,  and  are  authorized  to  assess  to  any  corporation  neglecting  or 
refusing  to  make  such  statement  such  amount  of  real  and  personal  property  as 
they  may  deem  reasonable  and  just. 

When  the  valuation  of  personal  property  is  determined  in  the  manner  set  forth, 
it  is  assessed  to  the  corporation  in  like  manner  as  individual  property. 

Until  1899  the  requirement  of  statements  of  the  property  of  corporations 
was  discretionary  with  the  assessors,  and  in  practice  they  were  generally  not 
required,  and  the  real  and  personal  property  of  corporations  under  the  general 
law  was  assessed  by  estimate  of  the  local  assessing  officers  as  individual  property, 
regardless  of  capital  stock,  franchise  valuations,  or  earning  power  as  factors,  and 
with  like  result  as  to  true  valuation. 

The  amendment  of  1899  makes  the  requirement  of  such  statements  mandatory, 
and  some  attempt  has  since  been  made  to  enforce  them. 

It  will  be  observed  that  no  specific  provisions  are  made  for  the  valuation .  or 
assessment  of  franchises,  and  their  value,  if  assessed  at  all,  must  be  included  in 
capital  stock  or  personal  property  generally. 

The  crudeness  and  inefficiency  of  this  system  as  applied  to  corporate  property 
is  obvious,  and  the  undervaluation  and  unequal  valuation  of  such  property  as 
compared  with  the  real  value  thereof,  based  upon  capital  stock,  franchises,  earn- 
ing power,  and  other  material  factors,  and  escape  of  property  from  the  rolls 
entirely,  are  disclosed  by  the  most  cursory  examination,  and  are  the  cause  of 
continual  controversy  throughout  the  State. 

The  taxation  of  corporate  property  under  the  general  law  in  Michigan  is  a  farce 
and  a  travesty  upon  justice  and  equality  of  taxation. 

Assessed  valuations,  1896. 

All  real  estate $805,553,976 

Personal  property,  including  that  of  corporations 140, 455, 965 

Total - 946,009,941 

The  total  was  equalized  by  the  State  board  of  equalization  to  $1,105,100,000. 


108  INDUSTRIAL    COMMISSION. 

The  assessed  valuation  of  real  property  in  1899  was  not  materially  increased 
over  the  above  figures,  the  real  estate  as  assessed  being  about  $825,000,000.  and 
that  of  personal  property  $144,000,000. 

Through  the  efforts  of  the  State  board  of  tax  commissioners,  the  valuations  for 
1900  were  materially  increased,  the  increase  being  §349,260.941  in  the  total  valua- 
tion—$180,594,302  on  real  estate,  and  $168,666,639  on  personalty. 

What  effect  this  increase,  made  somewhat  indiscriminately,  will  have  upon  the 
equality  of  taxation  throughout  the  State  can  not  yet  be  determined. 

SPECIFIC  TAXATION  SYSTEM. 

The  property  of  most  quasi-public  corporations  within  the  State  comes  within 
this  system,  imposing  fixed  rates  of  taxation  upon  gross  earnings. 

The  constitution  of  the  State  provides  that  all  specific  State  taxes,  except  those 
received  from  the  mining  companies  of  the  Upper  Peninsula,  shall  be  applied  to 
the  payment  of  the  primary-school  interest  fund  of  the  State. 

This  primary-school  interest  fund,  so  called,  is  apportioned  among  the  several 
townships  and  cities  of  the  entire  State  in  proportion  to  the  number  of  children 
in  each  between  the  ages  of  5  and  20  years. 

The  total  specific  taxes  for  1899  were  as  follows: 

From  railroad  companies. $1, 091, 526. 39 

From  river-improvement  companies 2, 180. 77 

From  insurance  companies 239, 500. 45 

From  plank-road  companies j 1, 188. 51 

From  express  companies . 13, 680. 56 

From  telegraph  and  telephone  companies 70, 058. 81 

From  freight,  palace,  and  sleeping  car  companies  ...   39i  93 

From  franchise  fees  . .  6. 441 . 88 


Total 1,424,617.30 

From  the  reports  of  the  auditor-general  it  appears  that  occasionally  a  county 
having  a  considerable  population,  but  small  amount  of  taxable  property,  receives 
a  larger  amount  from  this  primary-school  fund  than  the  entire  amount  of  State 
tax  contributed  by  such  county;  but  as  a  rule  the  amount  of  the  primary-school 
fund  apportioned  to  counties  constitutes  but  a  small  portion  of  the  amounts  of 
State  taxes  paid  by  them. 

Prior  to  1871  the  railroads  of  Michigan  were  required  to  pay  a  specific  tax  on 
their  respective  amounts  of  capital  stock  paid  in. 

In  1871  an  entirely  new  system  of  taxation  of  railroads  was  adopted,  based  upon 
earnings  instead  of  capital,  earnings  being  regarded  as  a  more  equitable  criterion 
of  value  for  the  purpose  of  taxation.  It  was  thought  that  a  road  that  earned 
nothing  was  of  little  value,  whatever  it  might  have  cost,  while  a  road  with  large 
earnings  was  valuable  regardless  of  its  cost. 

Difficulties  of  previous  systems  were  disposed  of  and  the  State  started  out  upon 
a  system,  which  has  ever  since  existed  and  still  continues,  of  taxation  upon  gross 
earnings. 

At  first  no  provision  was  made  in  regard  to  corporations  whose  roads  crossed 
the  State  line;  but  as  necessity  arose,  in  1873,  the  law  was  revised  and  provision 
made  for  the  taxation  of  a  corporation  whose  line  of  railroad  ' '  lies  partly  within 
and  partly  without  the  State,"  and  a  method  was  prescribed  for  arriving  at  the 
proportionate  earnings  of  such  a  road. 

RAILROAD  SPECIFIC-TAX  LAW. 

Under  the  existing  law  passed  by  the  legislature  in  1897,  increasing  the  graded 
specific-tax  rates  over  those  of  the  previous  law,  every  railroad  company  and 
union  railroad  station  and  depot  company  owning  or  operating  any  railroad 
situated  in  whole  or  in  part  in  Michigan  is  required,  on  or  before  July  1  of  each 
yjear,  to  pay  to  the  State  treasurer,  on  a  statement  of  the  auditor-general,  a  specific 
tax  upon  its  business  computed  in  the  following  manner: 

Upon  a  gross  income  not  exceeding  $2.000  per  mile  of  road  actually  operated 
within  the  State,  2£  per  cent  of  such  income. 

Upon  an  income  in  excess  of  $2,000  and  not  exceeding  $4.000  per  mile,  3£  per 
cent  thereof. 

Upon  all  such  income  in  excess  of  $4,000  per  mile  and  not  exceeding  $6,000  per 
mile,  4  per  cent  thereof. 


MICHIGAN    CORPOKATION    TAXES.  109 

Upon  all  such  income  in  excess  of  $6,000  per  mile  and  not  exceeding  §8,000  per 
mile,  4i  per  cent  thereof. 

Upon  all  such  income  in  excess  of  $8,000  per  mile,  5  per  cent  thereof. 

In  the  case  of  union  station  and  depot  companies  whose  earnings  are  in  excess 
of  $20,000  per  mile  the  rate  on  such  excess  is  10  per  cent. 

When  railroads  lie  partly  within  and  partly  without  the  State,  the  gross  income 
for  the  purpose  of  taxation  is  upon  the  earnings  of  the  road  in  Michigan,  com- 
puted by  adding  to  the  income  derived  from  business  entirely  within  the  State 
such  proportion  of  the  income  arising  from  interstate  business  as  the  length  of  the 
road  over  which  said  interstate  business  is  carried  in  Michigan  bears  to  the  whole 
length  of  the  road  over  which  it  is  carried.  While  the  legality  of  the  tax  upon 
earnings  from  interstate  commerce  has  been  questioned  in  discussion  in  this 
State,  it  has  not  been  tested  in  the  courts,  railroads  having  complied  with  the  law. 

The  taxes  so  paid  are  in  lieu  of  all  other  taxes,  except  real  estate  owned  and  not 
necessary  or  in  use  in  the  proper  operation  of  the  road,  such  estate  being  subject 
to  local  assessment  as  other  property  under  the  general  law. 

There  is  another  exception,  that  of  real  estate  for  local  assessment  for  special- 
improvement  taxes  in  cities  and  villages. 

Prior  to  1897  the  graded  specific  rate  of  taxation  was  as  follows,  there  being,  as 
above  set  forth,  a  considerable  increase  in  the  law  of  1897: 

Per  cent. 

Upon  gross  earnings  not  exceeding  $2,000  per  mile  _ . ....  2 

Upon  excess  of  $2,000  and  not  exceeding  $4,000  per  mile 2| 

Upon  excess  of  $4,000  and  not  exceeding  $6,000  per  mile 3 

Upon  excess  of  $6,000  and  not  exceeding  $8,000  per  mile 3| 

Upon  excess  of  $8,000  per  mile ... . . . 4 

The  following  table  shows  the  amount  charged  to  and  paid  by  the  railroads  of 
the  State  during  the  years  designated: 

1890 .$712,474.21     1895..  $676,115.78 

1891 859,645.22     1896 741,389.57 

1892 853,790.91     1897            735,964.43 

1893 893,801.6111898 .  879,521.90 

1894 811,290.14  j  1899 1,091,526.39 

It  should  be  borne  in  mind  that  these  amounts  are  in  lieu  of  all  other  taxes,  and 
represent  substantially  the  total  taxation  of  railways  in  the  State  during  the 
years  stated,  except  special  assessments  for  public  improvements  in  cities  and 
villages. 

VALUE   OF  RAILROAD   PROPERTY. 

The  State  railroad  commissioner,  in  his  annual  reports  for  1897  and  1898,  states 
the  total  cost  of  railways  in  Michigan  to  be  as  follows: 

1897: 

Wholly  or  in  part  within  the  State $1, 013, 504, 035. 31 

Cost  of  portions  within  the  State  _  291, 074, 216.  78 

1898: 

Wholly  or  in  part  within  the  State 1,025,741,348.54 

Cost  of  portions  within  the  State 294, 290, 145. 02 

Total  gross  income  or  receipts  from  operation  in  Michigan: 

1898 32,047,469.84 

1899 35,892,864.22 

Operating  expenses  for  1899 26, 162, 127. 21 

Net  earnings. ____ 9,730,737.00 

Tax  about  11  per  cent  of  net  earnings. 

The  reported  cost  of  railroads  affords  no  reliable  measure  of  the  actual  values 
of  such  property  and  no  proper  basis  for  taxation.  It  is  obvious  that  the  original 
cost  of  such  property  bears  no  necessary  relation  to  its  present  actual  value,  much 
less  to  its  present  earning  capacity. 

A  railroad  commissioner  of  this  State  recently  said:  "  The  cash  valuation  of  a 
railroad  is  fixed  by  the  amount  of  its  earnings,  continued  for  a  number  of  years, 
regardless  of  the'cost  of  construction;  in  short,  the  market  value  of  a  railroad 
depends  upon  its  past,  present,  and  prospective  earnings." 

Capitalizing,  according  to  the  method  adopted  by  the  Ohio  tax  commission  in 
1893,  namely,  earning  power  at  6  per  cent,  the  net  earnings  being  $9,730,737  in  1899, 
an  exceedingly  prosperous  year,  the  actual  value  of  the  property  producing  it 
would  be  16|  times  that  amount,  or  $162,178,950,  and  the  rate  of  taxation  thereon 


110  INDUSTRIAL    COMMISSION. 

substantially  6i  mills  on  the  dollar.  The  net  earnings  of  Michigan  railroads  for 
1895  were  $5,229,760.93,  which  amount,  according  to  the  above  rule,  would  indicate 
a  value  that  year  of  $87.162,682.16.  While  the  mileage  of  Michigan  railroads  is 
large,  it  is  not  uniformly  profitable,  nor  would  it  come  within  as  high  a  grade  or 
value  as  that  of  Ohio  railroads,  and  this  method  would  afford  no  reliable  criterion 
of  value.  The  assessed  valuation  of  Ohio  railroads  under  the  general-property 
tax  is  less  than  one-third  of  the  valuation  computed  by  the  above  method. 

TJie  assessed  valuation  of  the  railroads  of  Indiana  by  the  State  board  of  tax 
commissioners  under  the  unit  rule  in  1899  was,  in  round  numbers,  $153,000.000. 

The  grade  of  railroads  in  Indiana  is  much  higher  than  that  of  Michigan  rail- 
roads, Indiana  being  traversed  in  every  direction  by  the  great  trunk  lines:  and 
while  Michigan  has  a  few  more  miles  of  road  than  Indiana,  it  is  hardly  probable 
that  its  entire  mileage  could  be  fairly  appraised  at  anything  like  the  real  value  of 
the  Indiana  roads. 

The  Illinois  tax  commission  in  1886,  after  careful  study  of  railroad  statistics 
and  much  thought  given  to  the  average  proportion  between  gross  receipts, 
expenditures,  and  capitalized  values  of  railroads,  deduced  the  conclusion  that 
five  times  the  amount  of  the  gross  receipts  of  a  railroad  would,  for  purposes  of 
taxation,  fairly  represent  the  value  of  its  property,  and  would  b*  high  enough  to 
compare  with  other  property  assessed  on  a  'basis  of  full  cash  value. 

Applying  this  novel  rule  to  Michigan  railroads  would  result  in  a  taxable  value 
in  1898  of  $160,237,345  and  in  1899  of  $179.464,320. 

Inasmuch  as  considerable  controversy  has  arisen  in  this  State  during  the  past 
few  years  as  to  the  relative  amount  of  taxes  paid  by  the  railroads  of  the  State, 
compared  with  the  amount  paid  by  other  property  under  the  general-property 
tax,  a  few  observations  upon  this  subject  may  not  be  out  of  place  in  this  report. 
The  equalized  valuation  of  real  and  personal  property  of  the  State  under  the 
general-property-tax  law.  as  fixed  by  the  State  board  of  equalization  in  August, 
1896,  was  $1,105,100,000. 

The  taxes  levied  for  all  purposes  in  the  State,  including  all  specials  of  every 
kind,  but  excluding  all  specific  taxes,  as  shown  by  a  careful  investigation  of  the 
auditor-general,  amounted  to  $19,500,061.09. 

By  a  system  of  computation  made  in  the  auditor-general's  office,  in  which  are 
taken  into  consideration  as  factors  the  rate  of  taxation  in  the  respective  counties 
of  the  State,  and  also  the  various  amounts  of  property  to  which  these  rates  apply 
in  the  different  counties,  the  average  rate  of  taxation  is  shown  to  be  $1.76  on  each 
$100  of  equalized  valuation  of  the  year  1896. 

We  give  this  more  accurate  computation  for  the  reason  that  the  computations 
generally  made,  omitting  some  of  the  factors  above  named,  give  a  common  rate 
of  taxation  of  approximately  3  per  cent. 

Obviously,  in  ascertaining  an  accurate  rate  of  taxation  on  this  valuation  in  the 
State,  still  other  factors  should  be  considered.  The  equalized  valuation  of  prop- 
erty upon  which  the  computation  referred  to  is  based  is  very  much  less  than  the 
actual  cash  value  of  the  property  assessed  under  the  general  law,  the  cash  value 
of  property  assessed  being,  as  we  have  stated,  approximately  three  times  the 
assessed  valuation. 

When  in  connection  with  the  undervaluation  is  taken  into  consideration  the 
vast  amount  of  property,  real  and  personal,  exempt  from  taxation  under  the  gen- 
eral law,  and  the  enormous  amount  of  personal  property,  both  tangible  and  intangi- 
ble, which  remains  undisclosed  and  escapes  the  assessment  rolls  entirely,  it  will 
be  seen  that  the  strictly  correct  rate  of  taxation  of  property  under  the  general 
law,  as  compared  with  the  cash  value  of  property  under  the  specific-tax  system, 
based  upon  the  total  cost  of  such  property  or  upon  net  earnings  or  business,  would 
be  very  materially  reduced  b.elow  the  rate  of  $1.76  referred  to;  in  fact,  would  be 
but  a  small  portion  thereof. 

As  we  stated  elsewhere  (see  Ohio),  it  is  exceedingly  difficult  to  make  strictly 
equitable  and  reliable  comparison  between  two  entirely  different  methods  of  taxa- 
tion, the  one  based  upon  real  and  tangible  property,  partially  valued  by  estimate 
of  elective  officers,  and  the  other  based  upon  real  and  intangible  property,  f up- 
valued by  self -assessment,  based  upon  actual  business  and  earning  power,  without 
evasion  or  escape.  Could  such  comparison  be  reliably  made,  the  necessity  for  the 
adoption  of  a  different  method  for  intangible  and  corporate  property  would  dis- 
appear and  the  general-property  tax  would  be  adequate.  It  should  be  remem- 
bered that  the  methods  are  based  upon  entirely  different  principles  of  taxation, 
the  one  upon  property  value,  the  other  upon  productivity,  and  it  is  about  as  diffi- 
cult to  apply  a  like  measure  to  both  as  to  measure  water  with  a  yardstick. 

It  is  easy  to  juggle  with  intangible  and  speculative  values.  Indeed,  it  is  difficult 
to  avoid  juggling  in  the  attempt,  commendable  though  its  purpose  may  be,  at 


MICHIGAN    CORPORATION    TAXES.  Ill 

comparison  of  the  real  and  tangible  with  the  unreal  and  intangible  for  purposes 
of  taxation.  The  statistician  and  theorist  should  be  extremely  conservative  in  the 
comparison  of  one  great  class  of  property  upon  a  rule  of  valuation  based  upon 
productiveness,  upon  uncertain  and  intangible  elements,  with  tangible  property 
under  the  antiquated  and  slipshod  general  property-tax  system,  if  he  would  avoid 
conclusions  that  are  unreliable  and  misleading.  It  is  obviously  difficult,  if  at  all 
possible  from  a  scientific  standpoint,  to  frame  an  adequate  rule  of  comparison 
between  a  rate  of  taxation  on  gross  earnings  and  one  on  property  value  under  the 
general  property-tax  system.  The  most  elaborate  attempts  usually  end  in  conjec- 
ture and  an  uncertain  jumble  of  figures.  A  more  independent  consideration  of 
a  new  method  for  the  taxation  of  intangible  or  corporate  property  is  essential  to 
the  determination  of  its  adequacy  and  actual  merits. 

If  the  revenues  of  the  State  were  to  be  raised  from  the  incomes  of  persons  and 
business,  there  would  obviously  be  no  comparison  between  the  rates  of  taxation 
thereby  imposed  and  the  valuation  of  property  under  the  general-property  tax. 
This  is,  in  a  measure,  true  with  respect  to  gross-earnings  tax.  The  methods  are 
based  upon  different  principles.  In  the  application  of  a  scientific  method  of  taxa- 
tion to  a  great  class  of  corporate  property  owners,  the  end  to  be  attained  is  their 
subjection  to  a  fair  share  of  the  burdens  of  government.  To  go  beyond  that  is  to 
place  an  embargo  upon  the  prosperity  of  the  commonwealth. 

Justice  and  equality  require  that  corporate  property  be  fully  and  fairly  taxed, 
but  not  necessarily  by  like  methods  with  other  property. 

The  comparisons  frequently  made,  in  the  investigation. of  taxation,  between 
methods  or  between  results  in  different  States  under  different  systems,  when 
carefully  analyzed,  often  prove  unsound,  and  in  many  instances  would  appear 
ludicrous  were  it  not  seriously  proposed  to  frame  a  new  system  of  taxation  based 
upon  such  results. 

Whether  or  not,  under  the  present  specific-tax  law,  the  railroads  of  the  State 
are  bearing  their  portion  of  the  public  burdens  compared  with  property  assessed 
under  the  general  law  we  do  not  assume  to  say,  but  merely  suggest  some  of  the 
factors  which  should  be  taken  into  consideration,  the  dangers  to  be  avoided,  and 
the  methods  employed  for  the  purpose  of  determining  the  question  of  equality  of 
taxation  under  these  different  systems. 

GEOSS   RECEIPTS  TAX. 

The  gross  income,  as  defined  by  the  State  railway  commissioner  and  sustained 
by  the  courts,  is  held  to  include  substantially  all  the  receipts  of  railroads  of 
every  kind  or  nature.  The  amount  of  gross  receipts  is  fixed  by  computation 
based  upon  reports  of  the  railroad  companies.  The  law  requires  railroad  com- 
panies to  make  such  reports  annually,  and  imposes  a  penalty  for  neglect  to  make 
them  or  for  false  reports. 

The  system  of  taxing  gross  earnings,  as  applied  to  railroads  in  Michigan,  has 
been  in -force  and  operation  since  1871.  It  is  distinguished  from  the  general  prop- 
erty tax  in  that  it  is  based  directly  upon  income.  With  this  basis  the  rate 
of  taxation  is  fixed  by  law  and  does  not  depend  upon  the  changing  valua- 
tions of  assessors  or  commissions  selected  under  a  political  system.  The  specific 
tax  so  fixed  can  not  be  evaded.  It  is  uniform.  It  reaches  all  property  under  it 
and  subjects  it  to  contribution.  None  can  escape  it. 

RAILROAD  REPORTS   AND  ACCOUNTS. 

Soon  after  the  adoption  of  the  specific-tax  system  in  Michigan,  as  applied  to 
railroads,  the  necessity  for  a  correct  and  uniform  system  of  accounts  and  reports 
for  the  various  railways  doing  business  in  the  State,  as  a  basis  for  just  and  equal 
taxation,  for  wise  and  judicious  legislation,  and  for  other  obvious  purposes  was 
recognized. 

The  importance  of  this  subject  in  this  connection  was  clearly  discerned  by  the 
Hon.  W.  B.  Williams,  railway  commissioner  of  Michigan  for  1877  to  1883,  one 
of  the  ablest  and  most  industrious  commissioners  the  State  ever  had,  who  pro- 
ceeded to  formulate  such  a  system  of  accounts  and  reports,  and  to  cooperate  with 
commissioners  in  other  States  to  secure  its  adoption  by  railways  generally. 

As  the  tax  upon  gross  earnings  depended  upon  the  reports  of  railroad  companies 
to  be  taxed,  the  value  of  any  system  of  reports  that  might  be  adopted  depended  upon 
the  correctness  of  the  accounts  upon  which  they  were  to  be  made.  To  be  of  prac- 
tical value  for  the  purpose  of  a  taxation  basis  or  any  other  purpose,  it  was  neces- 
sary that  they  be  made  up  from  a  comprehensive  and  complete  statement  of 


112  INDUSTRIAL    COMMISSION. 

accounts  upon  the  books  of  such  companies,  and  not  from  estimates.  It  was  neces- 
sary that  such  accounts  be  authentic  and  sufficiently  complete  in  detail  to  furnish 
adequate  means  of  checking  and  verifying  them. 

Many  of  the  railroads  of  the  State  being  parts  of  continuous  lines  passing  into 
and  through  other  States,  a  system  of  accounts  to  be  of  practical  value  must  be 
uniform  throughout  all  the  States  traversed  by  such  roads. 

For  the  purpose  of  establishing  such  a  uniform  system  of  reports  and  accounts, 
a  convention  of  railroad  commissioners  was  called,  and  at  an  adjourned  meeting 
at*Saratoga  in  1879  the  report  of  a  committee  on  uniform  reports,  containing  sub- 
stantially the  form  of  report  and  accounts  previously  used  in  Michigan,  was 
adopted.  The  form  there  laid  down  was  wrought  out  by  commissioners  with  the 
aid  of  experts  in  railroad  accounting,  who  had  had  many  years  of  experience  in 
keeping  accounts  of  railroad  companies  and  making  reports  to  the  States  where 
they  were  located,  with  a  view  to  making  them  as  simple  and  comprehensive  in 
their  plan  as  possible,  and  at  the  same  time  supplying  the  information  required. 

This  system  was  adopted  by  the  convention,  as  well  as  by  the  officials  of  several 
States,  and  with  such  changes  as  from  time  to  time  became  desirable  has  been  in 
use  in  Michigan  and  some  adjoining  States  to  the  present  time. 

Accounts  are  open  to  public  inspection,  appear  in  the  public  reports  of  State  rail- 
road commissioners,  supply  accurate  and  reliable  information  as  a  basis  for 
taxation  of  gross  earnings  and  for  all  other  purposes,  and  through  them  is  or  may 
be  derived  the  full  benefit  of  publicity  of  the  business  and  operation  of  railroads. 
As  a  remedy  for  abuse  of  corporate  power  or  financial  combination  or  manipula- 
tion, publicity  of  reports  and  accounts  of  these  railroads  exists  to-day. 

REPORT   OF   THE  COMMITTEE   OF  RAILROAD  COMMISSIONERS. 

The  convention  of  State  railroad  commissioners  in  1878  appointed  a  special  com- 
mittee, consisting  of  Charles  F.  Adams,  of  Massachusetts,  W.  B.  Williams,  of 
Michigan,  and  J.  H.  Oberly,  of  Illinois,  to  examine  into  and  report  the  methods  of 
taxation  as  respects  railroads  and  railroad  securities  then  in  vogue  in  the  various 
States  of  the  Union,  as  well  as  in  foreign  countries,  and  to  report  a  plan  for  an 
equitable  and  uniform  system  for  such  taxation.  The  report  of  this  committee, 
making  special  reference  to  Michigan,  is  justly  celebrated  in  the  literature  of  tax- 
ation; and  it  is  so  applicable  in  its  description  of  the  chaotic  condition  of  railroad 
taxation  to  the  various  States  at  the  present  time  that  I  desire  to  embody  it 
herein: 

' '  Shortly  after  the  last  convention  of  commissioners  your  committee  issued  a 
circular  and  accompanying  interrogatories  in  relation  to  the  matter  referred  to 
them  for  investigation,  which  were  sent  to  all  the  State  executives  and  to  a  large 
number  of  the  railroad  corporations  of  the  country.  Through  the  courtesy  of  the 
State  Department  at  Washington  the  representatives  of  the  National  Government 
at  the  principal  capitals  in  Europe  were  also  called  upon  for  information  on  the 
rail  way -tax  systems  there  in  use.  As  a  result  some  60  answers  were  in  all  received, 
covering  the  various  States  of  the  Union,  Canada,  England,  France,  Belgium, 
Holland,  Germany,  Russia,  Switzerland,  and  Austria-Hungary.  The  information 
contained  in  these  answers  is  much  of  it  of  great  value,  especially  in  the  case  of 
the  documents  relating  to  the  systems  of  taxation  in  use  in  foreign  countries. 
These  the  committee  have  printed  in  full  as  a  part  of  the  present  report,  as  the 
facts  and  statements  contained  in  them  are  not  elsewhere  to  be  found  in  any 
easily  accessible  shape.  A  compendium  of  the  systems  in  use  in  all  the  States  of 
the  Union  has  been  prepared,  and  likewise  forms  a  part  of  this  report. 

' ;  On  examining  this  compendium  of  State  systems  in  present  use  in  this  country 
it  will  at  once  be  observed  that  they  are  much  more  varied  than  would  naturally 
be  supposed,  or  perhaps  than  would  have  been  thought  possible.  Generally  it 
may  be  said  that  there  is  no  one  principle  running  through  the  various  systems 
described;  and  further,  that  there  is  no  method  of  taxation  possible  to  be  devised 
which  is  not  at  this  time  applied  to  railroad  property  in  some  part  of  this  country. 
So  far  as  those  now  well-recognized  principles  which  should  be  at  the  basis  of  all 
systems  of  taxation  are  concerned,  they  would  as  a  rule  seem  to  have  been  utterly 
ignored.  In  two  adjoining  States,  for  instance,  with  roads  belonging  to  one  com- 
pany operating  in  both,  will  be  found  on  one  side  of  the  line  a  system  simple, 
direct,  equitable,  imposing  a  moderate  and  fixed  burden  from  which  there  is  no 
escape,  while  on  the  other  side  of  the  line  will  be  met  a  system  which  can  be  said 
to  be  based  on  nothing  more  reliable  than  arbitrary  guesswork.  In  certain 
States  the  railroads  are  apparently  looked  upon  as  a  species  of  windfall,  from 
which  everything  which  can  be  exacted  in  the  way  of  taxation  is  so  much  pure 
gain.  In  other  States  they  escape  with  very  slight  and  wholly  disproportionate 


MICHIGAN    COKPOKATION    TAXES.  113 

burdens.  The  franchise  tax,  the  gross  and  net  earnings  tax,  the  personal  prop- 
erty tax,  the  realty  tax,  all  are  met  with  indiscriminately — applied  sometimes  by 
local  boards,  sometimes  by  boards  of  State  equalization,  but  almost  invariably  in 
utter  disregard  of  any  principle. 

"A  more  striking  and  in  some  respects  discouraging  example  of  general  con- 
fusion as  regards  an  important  matter  of  fiscal  legislation  could  hardly  be 
imagined. 

"  The  conclusions  reached  by  the  committee  as  the  result  of  their  investiga- 
tions can  be  very  briefly  stated.  The  requisites  of  a  correct  system  of  railroad, 
as  of  other  taxation,  are  that  it  should,  in  so  far  as  it  is  possible,  be  simple,  fixed, 
proportionate,  easily  ascertainable,  and  susceptible  of  ready  levy.  Very  few  of 
the  systems  now  in  use  in  this  country  were  found  to  possess  any  of  these  requi- 
sites. So  far  from  being  fixed,  they  are,  most  of  them,  extremely  arbitrary  and 
fluctuating.  Neither  are  they  proportionate,  as  in  some  cases  the  measure  of 
valuation  is  the  market  price  of  securities;  in  others,  the  arbitrary  estimates  of 
appraisers;  in  yet  others,  gross  receipts,  and  in  others,  local  assessment.  That 
the.  tax  should  be  almost  impossible  of  ascertainment  under  these  circumstances 
does  not  need  to  be  said.  As  to  being  susceptible  of  ready  levy,  any  tax  assessed 
on  and  paid  by  a  railroad  corporation  is  that;  but  it  would  appear  that  a  large 
portion  of  the  taxes  now  nominally  levied  must  either  be  evaded  or  else  are  in 
the  nature  of  double  taxation,  for  the  -securities  on  which  they  are  assessed  are, 
in  the  eye  of  the  law,  personal  property,  assessable  at  the  residence  of  the  owner. 
If,  therefore,  these  securities,  whether  bonds  or  stock,  are  taxed  to  the  corpora- 
tion in  the  State  where  its  road  is  situated,  they  are  as  personal  property  subject 
to  a  further  tax  in  the  place  of  the  holder's  residence,  if  he  happens  to  reside  in 
another  State;  if  such  securities  are  not  taxed  to  the  corporations,  then,  whether 
they  are  taxed  at  all  must  depend  upon  the  honesty  of  the  holder,  wherever  he 
lives,  or  the  astuteness  of  the  local  taxgatherer.  The  utmost  inducement  to 
fraud  and  evasion  is  thus  systematically  held  out.  For  the  conscientious  holder 
of  stock  or  bonds  there  may  be  no  escape  from  double  taxation  of  the  most 
oppressive  kind,  while  for  the  unscrupulous  the  door  for  evasion  is  wide  open. 

' '  The  conclusion  at  which  your  committee  arrived  was  that  all  the  requisites 
of  a  sound  system  were  found*  in  taxes  on  real  property  and  on  gross  receipts,  and 
in  no  others — in  fact,  that  when  these  were  properly  imposed  no  other  taxes  were 
or  could  be  necessary,  as  nothing  would  escape  untaxed.  Under  this  system  the 
real  estate  of  the  railroad  corporations  held  for  corporate  use,  outside  of  their 
right  of  way,  would  be  locally  assessed  exactly  in  the  same  way  as  the  real  estate 
of  private  persons  or  of  other  corporations  adjoining  it  was  assessed.  There 
would  be  no  distinction  made  in  regard  to  it.  It  is  the  ordinary  tax  on  real 
property.  Beyond  that  a  certain  fixed  percentage  established  by  law  and  of  gen- 
eral application  should  be  assessed  on  the  entire  gross  earnings  of  the  corpora- 
tions, and  this  should  be  in  lieu  of  all  forms  of  taxation  on  what  is  known  as 
personal  property.  Under  this  system  the  rolling  stock  of  the  corporation  would 
not  be  assessable,  nor  its  securities,  whether  stock  or  bonds,  either  indirectly 
through  the  corporation  or  directly  in  the  hands  of  those  owning  them.  The 
entire  burden,  be  the  same  more  or  less,  would  be  imposed  in  one  lump  on  the 
corporation  and  levied  directly.  It  does  not  need  to  be  pointed  out  that  this  sys- 
tem is  perfectly  simple;  that  under  it  taxation  is  fixed  by  a  general  law  and  not 
by  local  valuations;  that  it  is  thoroughly  proportionate,  inasmuch  as  the  amount 
levied  depends  on  the  amount  of  gross  receipts;  finally,  it  can  be  ascertained  by 
anyone,  and  can  by  no  possibility  be  evaded. 

' '  The  apportionment  of  a  levy  on  gross  receipts  among  the  several  States  through 
which  a  single  railroad  may  run  is,  in  this  country,  undoubtedly  attended  with 
much  difficulty,  and  the  committee  have  given  careful  consideration  to  the  subject. 
The  conclusion  at  which  they  have  arrived  is  that  it  should  be  made  a  matter  of 
mutual  understanding  among  the  States,  and  that,  as  the  levies  must  be  inde- 
pendent, they  should  be  apportioned  according  to  mileage.  That  is,  real  estate 
owned  by  each  corporation,  outside  of  its  right  of  way,  should  be  locally  assessed 
where  it  is  situated,  without  regard  to  the  fact  that  it  belongs  to  a  corporation 
and  is  used  for  railroad  purposes.  The  vast  and  costly  terminal  grounds  in  New 
York,  Chicago,  and  all  the  other  great  trade  centers,  would  thus  be  locally  taxed 
at  those  centers,  and  on  the  basis  of  valuation  for  similar  adjoining  land  there  in 
use.  Real  estate  in  the  country,  on  the  other  hand,  would  be  taxed  at  the  country 
or  agricultural  valuation.  The  realty  outside  of  the  right  of  way  being  thus  dis- 
posed of  for  purposes  of  taxation  on  fixed  principles  easily  understood,  the  entire 
gross  earnings  of  the  corporations  should  be  subject  to  assessment  by  each  State 
through  which  its  road  might  run  in  the  proportion  in  which  the  miles  of  road  in 
that  State  bear  to  its  whole  number  of  miles.  The  percentage  of  the  levy  would 


114  INDUSTRIAL    COMMISSION. 

then  be  greater  or  smaller  according  to  the  law  of  the  State,  but  the  proportion 
of  the  whole  amount  upon  which  the  levy  was  to  be  made  would  be  fixed  and 
always  easy  of  ascertainment.  The  disposition  of  the  tax  thus  levied,  when  paid 
into  the  hands  of  the  State  authorities— whether  it  should  be  retained  in  the  State 
treasury  or  distributed  among  localities,  either  those  through  which  the  road 
might  run  or  those  in  which  the  holders  of  its  securities  reside— would  be  matter 
for  adjustment  by  legislation.  It  could  either  be  retained  in  the  State  treasury 
or«paid  back  into  the  local  treasuries  or  the  counties  or  towns  in  which  the  roads 
are  located  on  mileage  proportions  or  ratably  distributed  among  all  the  munici- 
palities of  the  State.  It  is  a  tax  on  transportation,  whether  of  persons  or  property. 
It  is  very  possibly  as  equitable  a  method  of  raising  money  by  taxation  as  can  be 
devised.  If  it  could,  therefore,  once  be  uniformly  and  properly  adjusted,  the  dis- 
tribution of  the  results  of  the  tax  would  present*  very  few  difficulties.  All  com- 
munities, and  every  part  of  each  community  are  dependent,  more  or  less  directly, 
on  railroad  transportation.  A  general  tax  upon  it,  if  properly  imposed,  would  be 
felt  not  unequally  by  all,  and  might,  perhaps,  not  unjustly  be  shared  by  all.  As 
will  be  seen  on  reference  to  the  accompanying  reports,  this  method  of  imposing 
an  indirect  tax  is  not  uncommon  in  Europe.  In  France,  especially,  a  large  rev- 
enue, which  has  amounted  to  more  than  $20.000,000  a  year,  has«been  thus  levied. 
This  is  not,  however,  properly  a  railroad  tax,  but  rather  a  tax  collected  through 
the  instrumentality  of  the  railroads,  the  companies  operating  them  being,  in  so 
far,  used  as  taxgatherers. 

"  Recurring,  however,  to  the  railroad  tax  proper — that  is,  to  the  sum  collected 
from  the  railroads  as  their  fairly  proportionate  part  of  the  common  burden — 
where  this  tax  is  now  levied  as  an  entirety  by  the  State  government,  the  most 
usual  method  of  distribution  is  to  divide  it  among  the  counties  and  municipalities 
through  which  each  road  runs  in  proportion  to  the  length  of  it  therein.  In  Massa- 
chusetts the  tax  is  paid  over  to  the  place  of  residence  of  the  individual  stock- 
holder, and  any  undistributed  balance  is  paid  into  the  treasury  of  the  State.  In 
Michigan  the  whole  amount  of  the  tax  is  paid  to  and  retained  by  the  State,  being 
devoted  to  special  purposes.  In  Mississippi,  where  there  is  a  franchise  tax,  one- 
half  of  it  goes  to  the  counties  through  which  the  road  runs,  the  balance  to  the 
State.  In  New  Hampshire,  again,  one-fourth  of  the  tax  is  paid  to  the  towns 
through  which  the  road  passes,  in  proportion  to  the  amount  expended  in  each 
town  for  right  of  way  and  taxes.  The  other  three-quarters  is  divided  among  the 
towns  in  proportion  to  the  stock  owned  therein.  In  this  respect,  therefore,  as  in 
all  others,  the  existing  State  systems  afford  every  variety  of  precedent.  The  dis- 
tribution to  be  made  of  a  tax  after  it  is  collected  in  no  way,  however,  affects  the 
proper  method  of  collecting  it.  It  must  so  largely  depend  on  local  exigencies 
that  no  general  rule  regulating  it  would  seem  to  be  possible. 

"  Finally,  the  committee  will  say,  that  of  all  the  systems  of  taxation  examined 
by  them,  those  in  use  in  England,  among  the  countries  of  Europe,  and  in  Michigan 
and  Wisconsin,  among  the  States  of  the  Union,  seem  to  them  most  intelligent 
and  in  conformity  with  correct  principles.  The  Michigan  and  Wisconsin  systems 
would  seem  to  be  especially  commendable.  The  systems  in  use  in  many  of  the 
older  States,  on  the  contrary,  and  notably  in  the  States  of  Massachusetts,  New 
York,  Pennsylvania,  and  Ohio,  are  very  cumbersome,  and  present  hardly  any 
features  worthy  of  study  or  imitation. 

"That  of  Massachusetts,  for  instance,  is  based  upon  no  recognized  principle, 
would  admit  of  evasions  in  a  most  obvious  way,  and  is  impossible  of  any  general 
application.  The  fundamental  idea  with  it  is  that  the  capital  stock  represents 
the  property,  and  that  its  market  value  will,  therefore,  approximately  measure  it 
for  purposes  of  taxation.  A  heavily-bonded  road  under  this  system  practically 
escapes  taxation;  and  again,  where  the  stock  is  owned  outside  of  the  State  in  which 
the  road  is  situated  the  tax  levied  on  it  inures  not  to  the  State  of  the  owner's  resi- 
dence but  to  that  in  which  the  property  is  located.  Under  such  a  system  it 
hardly  needs  to  be  said  that  the  taxation  fluctuates  widely  in  amount,  and  that, 
the  amount  of  debt  behind  the  capital  stock  being  disregarded,  the  burden  bears 
no  necessary  relation  to  actual  earning  capacity,  whether  net  or  gross.  Clumsy 
and  devoid  of  scientific  merit,  as  it  unquestionably  is,  however,  the  Massachusetts 
system  would  seem  to  be  preferable  to  that  still  in  use  in  New  York,  concerning 
which  the  State  assessors,  in  their  annual  report  for  1873,  expressed  the  opinion 
that  under  it  there  was  '  no  uniform  rule  for  anyroad  in  any  county,  each  assessor 
being  governed  entirely  by  his  own  views.'  In  certain  towns  the  railroads  appear 
to  pay  about  one-third  of  the  entire  taxes,  while  the  assessed  valuation  in  1878 
varied  from  $400  per  mile  to  $100  per  rod.  The  '  difference  in  the  assessment  of 
the  New  York  Central  and  Hudson  River  road,  where  for  all  purposes  that  the 
road  can  be  used  it  is  of  the  same  value  to  the  company,  is  $24,000  per  mile.  In 


MICHIGAN    CORPORATION    TAXES.  115 

short,  it  is  scarcely  an  exaggeration  to  say  that  the  assessments  are  as  unlike  as 
the  complexion,  temperament,  and  dispositions  of  the  assessors.'  It  does  not 
need  to  be  pointed  out  that  a  system  such  as  this,  and  it  is  the  system  in  most  gen- 
eral use,  compels  the  corporations  in  self-defense  to  an  active  participation  in 
local  politics.  Indeed,  it  is  not  too  much  to  say  that  as  a  system  it  is  open  to 
almost  every  conceivable  objection. 

"It  does  not  seem  necessary  to  proceed  in  the  enumeration  of  States,  as  the 
objections  to  which  the  system  of  each  is  open  will  readily  suggest  themselves  to 
anyone  at  all  familiar  with  the  principles  of  correct  taxation,  on  reference  to  the 
accompanying  abstract  of  those  systems.  It  is  very  apparent  that  the  subject  of 
railroad  taxation  is  one  which,  in  this  country,  has  as  yet  received  very  little  mature 
consideration.  With  a  view  to  affording  some  basis  for  better  legislation,  the 
committee  submit  with  the  accompanying  documents,  the  following  form  of  law, 
in  which  the  phraseology  of  the  Michigan  statute  has  been  very  closely  followed. 

"C.  F.  ADAMS,  Jr.,  of  Massachusetts, 
'•  W.  B.  WILLIAMS,  of  Michigan, 
"  JNO.  H.  OBERLY,  of  Illinois, 

"  Committee.'" 

EXPRESS,  TELEGRAPH,  AND  TELEPHONE  COMPANIES. 

Prior  to  1899  express  companies  doing  business  in  Michigan  were  required  by 
law  to  procure  each  year  from  the  State  treasurer  certificates  of  license  or 
authority  to  do  business,  and,  as  a  condition  precedent  to  the  issuing  or  renewal 
of  certificates,  to  pay  into  the  State  treasury  a  specific  tax  on  the  gross  amount 
received  by  them  within  the  State  for  the  year  previous. 

The  amount  of  taxes  paid  by  such  companies  in  1898  was  $2,608.53.  In  1898  the 
rate  was  changed  from  1  to  5  per  cent  on  gross  receipts,  and  the  tax  at  the  new 
rate  in  1899  was  $13,680.56. 

The  companies  doing  business  under  this  law  within  the  State  were  the  Adams, 
American,  Canadian,  Dominion,  National,  Pacific,  United  States,  and  Western. 

Prior  to  1899  every  telegraph  and  telephone  line  built  and  operated  within  the 
State  was  required  to  furnish  the  auditor-general  011  or  before  the  first  Monday  of 
July  of  each  year  a  statement  under  oath  showing  the  number  of  miles  owned, 
operated,  or  leased,  number  of  separate  wires,  number  of  stations,  instruments 
in  use,  number  of  poles,  and  miles  of  wire  used.  Upon  receipt  of  such  statement 
a  board  of  review,  consisting  of  the  auditor-general,  State  treasurer,  and  com- 
missioner of  the  land  office,  assessed  such  lines  at  the  true  cash  value  thereof.  The 
rate  of  tax  levied  and  collected  upon  such  assessment  was  what  such  board  should 
determine  to  be  the  average  rate  of  taxes,  general,  municipal,  and  local,  through- 
out the  State  during  the  previous  year,  which  rate  was  ascertained  from  the  rec- 
ords of  the  auditor-general's  office.  This  was  payable  to  the  State  treasurer  in 
lieu  of  all  other  taxes,  State  and  local. 

Under  this  law  the  average  rate  of  taxation  for  1897  was  found  by  the  system 
of  computation  employed  to  be  3  per  cent,  and  the  taxes  payable  by  such  com- 
panies for  the  fiscal  year  ending  June  30,  1898,  amounted  to  $60,506.71. 

In  1899  the  average  rate  was  fixed  at  2.08  per  cent,  and  the  taxes  in  1899  were 
$70,058.81. 

The  telegraph  and  telephone  law  (in  a  test  case  hereinafter  referred  to  under 
the  heading  -'The  Atkinson  Law")  was  held  to  be  unconstitutional  by  the 
supreme  court  in  April,  1899,  and  in  June  of  that  year  a  new  law  for  the  taxation 
of  express,  telegraph,  and  telephone  companies  was  passed. 

By  this  new  law  every  such  company  doing  business  in  the  State  is  required  to 
furnish  the  auditor-general  an  annual  sworn  statement  showing  the  following 
facts  concerning  its  operation  for  the  year. 

In  the  case  of  express  companies: 

(a)  The  name  and  locality. 

(6)  The  amount  of  capital  stock,  and  amount  paid  in  thereon. 

(c)  The  number  of  agencies  or  places  of  business  in  the  State. 

(d)  The  amount  of  gross  receipts  on  current  business  in  the  State  for  the  pre- 
vious year. 

(e}  The  total  number  of  miles  over  which  the  company  does  business  in  the 
State. 

In  the  case  of  telegraph  and  telephone  lines: 

(a)  The  total  number  of  miles  owned,  operated,  or  leased  within  the  State. 

(&)  The  total  number  of  miles  in  each  separate  line  or  division  thereof,  together 
with  the  number  of  separate  wires  thereon,  and  the  counties  through  which  the 
line  is  carried,  and  in  which  the  business  is  conducted. 


116  INDUSTRIAL    COMMISSION. 

(c)  The  total  number  of  telegraph  or  telephone  stations  on  each  separate  line, 
and  the  number,  of  instruments  in  use  therein,  together  with  the  number  of 
stations  maintained. 

(d )  The  average  number  of  poles  per  mile. 

(«)  The  number  of  poles  and  number  of  miles  of  wire  used  for  each  exchange  or 
line. 

(/)  The  amount  of  gross  receipts  on  the  current  business  in  the  State  during 
tile  preceding  year. 

A  penalty  of  $1 ,000  is  imposed  upon  any  company  failing  or  neglecting  to  make 
such  report  or  making  a  false  report,  and  a  continued  willful  violation  or 
refusal  to  make  such  report  may  be  cause  for  forfeiture  of  its  franchise. 

A  specific  tax  is  imposed  upon  the  "property  and  business "  of  such  companies, 
operating  within  the  State,  "  equal  to  an  amount  to  be  computed  in  the  following 
manner:" 

Upon  the  gross  receipts  of  such  companies  derived  from  business  within  the 
State,  3  per  cent  thereof.  This  tax  is  in  lieu  of  all  other  taxes  upon  the  properties 
,  and  business  of  such  companies,  except  real  estate  not  used  in  the  operation  of 
their  business. 

Under  this  law  the  amount  of  taxes  charged  against  express  companies  for  the 
fiscal  year  ending  June  30^  1900,  was  $14,806.82,  and  against  telegraph  and  tele- 
phone companies  $44,753.64. 

THE  ATKINSON  LAW  OF  1899. 

The  reform  of  or  change  in  the  existing  methods  for  the  taxation  of  the  property 
of  railroads  and  other  public  corporations  has  been  the  subject  of  vigorous  political 
controversy  in  this  State  during  the  past  few  years,  and  the  legislature  in  1899 
passed  a  new  law  providing  for  the  assessment  and  levy  of  taxes  upon  the  prop- 
erty of  railroad,  express,  telegraph,  and  telephone  companies,  making  a  radical 
change  in  the  methods  of  taxation  of  such  property,  taking  it  out  of  the  specific- 
tax  system  and  bringing  it  under  the  general-property  tax. 

It  provided  for  the  appointment  by  the  governor  of  a  State  board  of  assessors, 
consisting  of  3  members,  who  should  have  access  to  the  books,  papers,  and  accounts 
of  the  departments  of  State,  of  counties,  townships,  and  municipalities,  with  the 
power  to  examine  witnesses  under  oath  as  to  corporate  property,  and  the  right  to 
examine  books,  papers,  and  accounts  of  any  corporation  owning  property  to  be 
assessed  by  said  board.  It  imposed  upon  said  board  the  duty  to  assess  all  property 
in  the  State  of  railroad,  express,  telegraph,  and  telephone  companies. 

The  board  might  inspect  all  the  property  belonging  to  such  companies  for  the 
purpose  of  arriving  at  the  true  cash  value  thereof  for  the  purposes  of  assessment 
and  taxation;  and  for  the  same  purpose  might  consider  the  reports  and  returns 
of  said  companies,  the  value  of  their  stock  as  listed  on  the  stock  exchanges  of  New 
York  and  Boston,  together  with  such  other  evidence  as  it  might  be  able  to  obtain 
bearing  upon  the  true  cash  value  of  the  property,  and  make  an  assessment  roll 
each  year  containing  a  list  of  all  property  by  it  assessed. 

The  board  should  then  determine  the  aggregate  taxes  raised  in  the  whole  State 
for  State,  county,  and  municipal  purposes  for  the  current  year,  exclusive  of 
special-improvement  assessments;  and  for  such  purpose  local  officials  were 
required  to  make  special  returns  as  the  board  might  require.  The  board  should 
determine  the  average  rate  of  State,  county,  and  municipal  taxes  throughout  the 
State  by  dividing  the  aggregate  taxes  for  the  current  year  by  an  aggregate  sum 
to  be  determined  by  adding  to  the  total  value  of  all  property  assessed  under  the 
act  the  equalized  value  of  all  property  assessed  in  the  State. 

The  board  should  then  tax  the  property  of  the  several  companies  as  assessed  by 
it  at  the  average  rate  of  taxation  as  determined  by  it,  and  the  amounts  so  taxed 
should  be  paid  to  the  State  treasurer  in  lieu  of  all  taxes  for  State  and  local  pur- 
poses, not  including  special-improvement  taxes;  all  such  taxes  to  be  applied,  as 
under  the  existing  specific  tax  system,  to  paying  the  interest  on  the  educational 
funds  of  the  State. 

Every  such  company  doing  business  in  the  State  was  required  to  file  rigorous 
detailed  annual  statements  under  path  showing,  among  other  things,  the  character, 
location,  and  officers  of  the  organization;  the  number,  par  value,  and  market  value 
of  the  shares  of  stock;  detailed  statements  of  real  estate  and  value  thereof;  a  full 
inventory  of  personal  property,  including  money  and  credits  owned;  total  value 
of  real  and  personal  estate  outside  of  Michigan;  in  the  case  of  railroad,  telegraph 
and  telephone  companies,  the  whole  length  of  their  lines  and  the  length  of  their 
lines  without  and  within  the  State;  statement  of  the  entire  gross  receipts  from 
business  wherever  done  and  the  gross  receipts  in  Michigan;  in  the  case  of  express 


MICHIGAN    CORPORATION    TAXES.  117 

companies,  the  length  of  lines  of  rail  and  water  over  which  they  did  business,  and 
the  length  of  said  lines  without  and  within  the  State;  and  such  other  facts  and 
information  as  the  board  might  require. 

It  was  specially  provided  that  the  franchises  of  the  companies  should  be  consid- 
ered in  determining  the  value  of  the  property  to  be  assessed,  and  in  case  of  rail- 
road companies  owning  and  operating  road  partly  within  and  partly  without  the 
State,  the  board  should  assess  such  companies  for  the  fair  proportion  which  their 
property  in  the  State  bore  to  their  entire  property.  All  such  property  was  to  be 
assessed  at  its  true  cash  value,  which  was  denned  to  mean  the  usual  selling  price 
at  the  place  where  the  property  might  be  at  the  time  of  assessment,  at  private  sale 
and  not  at  forced  or  auction  sale.  In  ascertaining  the  value,  the  earning  capacity 
of  the  property  might  be  considered. 

After  the  enactment  of  this  law,  known  as  the  "  Atkinson  law,"  a  test  case  was 
brought  before  the  supreme  court  of  the  State  under  the  telegraph  and  telephone 
tax  law,  which  was  somewhat  similar  to  the  Atkinson  law,  and  that  law  was  held 
to  be  unconstitutional  and  void,  although  it  had  been  acquiesced  in  by  the  cor- 
porations and  by  the  public  from  the  time  of  its  enactment  in  1879,  on  the  ground 
that  being  a  tax  on  property,  based  on  assessment,  it  was  not  a  specific  tax,  but 
an  ad  valorem  or  property  tax,  and  was  not  within  the  uniform  rule  of  taxation 
prescribed  by  the  constitution  of  the  State,  for  the  reason  that  it  was  based  upon 
the  average  rate  of  taxation  throughout  the  State,  and  not  the  local  rate  applicable 
to  other  assessed  property. 

This  decision  in  the  case  of  Pingree  v.  Auditor-General,  April  25,  1899  (120 
Mich.,  95),  was  regarded  as  invalidating  the  Atkinson  law. 

The  law  as  to  the  taxation  of  telegraph  and  telephone  companies  having  been 
thus  invalidated,  the  legislature  enacted  another  law  for  the  taxation  of  the  prop- 
erty and  business  of  express,  telegraph,  and  telephone  companies,  which  has 
already  been  referred  to. 

INSURANCE  COMPANIES. 

All  insurance  companies  insuring  lives  within  this  State,  and  not  deriving  cor- 
porate existence  from  its  laws,  are  required,  at  the  time  of  filing  their  annual 
reports,  to  pay  to  the  State  treasurer  a  tax  of  2  per  cent  on  all  premiums  received 
from  within  the  State,  which  specific  tax  is  in  lieu  of  all  other  taxes  in  the  State. 

Plate-glass,  accident,  live-stock,  steam-boiler,  and  fidelity  insurance  companies 
are  required  to  pay  a  specific  tax  of  2  per  cent  on  the  gross  amotint  of  premiums 
received  each  year. 

All  foreign  insurance  companies,  fire,  marine,  life,  and  health,  pay  an  annual 
specific  tax  of  3  per  cent  upon  the  gross  amount  of  all  premiums  received  from 
within  the  State. 

There  is  no  specific  tax  on  insurance  corporations  organized  in  Michigan,  the 
property  of  such  companies  being  taxed  under  the  general  law.  The  total  amounts 
of  specific  taxes  derived  from  insurance  companies  during  the  fiscal  year  ending 
June  30,  1898  and  1899,  were  as  follows: 


Character  of  business. 

1898. 

1899. 

Fire  insurance  companies                                                      

$127,  353.  95 

$134,  816.  32 

Life  insurance  companies 

86,  419.  44 

95,  344.  98 

5,  379.  29 

9,  339.  15 

Total  specific  tax  on  insurance  companies 

219,  152.  68 

239,  500.  45 

RIVER  IMPROVEMENT  COMPANIES. 

Corporations  organized  for  the  improvement  of  river  navigation  are  required 
to  pay  to  the  treasurer  of  the  State  an  annual  tax  at  the  rate  of  1  per  cent  on  the 
whole  amount  of  capital  paid  upon  their  capital  stock,  estimated  each  year  upon 
the  last  preceding  reports  of  such  corporations,  which  tax  is  in  lieu  of  all  other 
taxes  upon  their  property. 

The  amount  of  this  tax  in  1899  was  $2,180.77. 

MINING  COMPANIES. 

Formerly  a  specific  tax  for  State  purposes  was  imposed  upon  mining  companies, 
in  addition  to  the  regular  tax  for  local  purposes,  the  rate  being,  upon  copper  75 
cents,  on  iron  1  cent,  and  on  coal  one-half  cent  per  ton  of  product;  but  this  specific 


118  INDUSTRIAL    COMMISSION. 

tax  was  repealed  in  1891,  since  which  time  such  companies  have  been  subject  to 
the  general  law  for  all  taxes. 

It  is  quite  generally  believed  that  their  property  under  the  general  law  is  very 
inadequately  taxed. 

ROAD  COMPANIES. 

JPlank  and  gravel  road  companies  are  required  to  pay  to  the  State  treasurer  an 
annual  tax  of  2^  per  cent  of  the  gross  earnings,  on  or  before  the  first  day  of  July 
in  each  year,  in  lieu  of  all  other  tax  upon  their  property. 

Upon  such  companies  taxes  were  charged  in  1898  amounting  to  $921.63;  in 

1899,$1,188.51. 

FRANCHISE  FEES. 

Every  corporation  organized  under  any  general  or  special  law  of  the  State,  and 
every  corporation  permitted  to  transact  business  in  the  State,  is  required  to  pay 
a  franchise  fee  of  one-half  of  1  mill  on  each  dollar  of  the  authorized  capital  stock 
of  such  corporation,  and  a  proportionate  fee  upon  any  and  each  subsequent 
increase  thereof,  which  fee  shall  in  no  case  be  less  than  $5.  • 

The  amount  of  franchise  fees  received  by  the  State  under  this  law  in  the  year 
1897  was  $32,715.43;  in  1898,  $22,140.75,  and  in  1899,  $99,511.35. 

LIQUOR  TAX. 

There  is  a  law  in  Michigan  providing  for  the  taxation  of  the  business  of  manu- 
facturing or  selling  spirituous  or  intoxicating  liquors,  or  malt,  brewed,  or  vinous 
liquors  in  the  State,  as  follows:  Upon  the  business  of  selling  only  brewed  or  malt 
liquors,  $500  per  annum;  upon  the  business  of  selling  spirituous  or  intoxicating 
liquors  at  wholesale  or  retail,  $500  per  annum;  or  at  wholesale  and  retail,  $800 
per  annum;  upon  the  business  of  manufacturing  brewed  or  malt  liquors  for  sale, 
$65  per  annum;  upon  the  business  of  manufacturing  spirituous  or  intoxicating 
liquors,  $800  per  annum. 

These  taxes  are  paid  in  the  several  counties  of  the  State,  and  the  receipts  reported 
annually  to  the  auditor-general  of  the  State  by  the  county  treasurers. 

During  the  year  closing  December  1,  1896,  the  aggregate  amount  of  such  taxes 
paid  to  the  county  treasurers  was  $1,839,960.92:  year  closing  December  1,  1897, 
$1,154,998.19;  and  December  1,  1898.  $1,827,667.13. 

The  above  liquor  taxes  are  designated  as  license  fees,  and  persons  paying  them 
do  not  thereby  secure  any  immunity  from  other  methods  of  taxation. 

INHERITANCE  TAX. 

The  legislature  in  1899  passed  an  act  providing  for  the  taxation  of  inheritances. 
It  imposes  a  tax  of  5  per  cent  upon  the  clear  market  value  of  any  property,  real  or 
personal,  of  the  value  of  $500  or  over,  when  transferred  by  will  or  by  intestate 
laws  from  any  person  dying  seized  or  possessed  of  the  property  while  a  resident 
of  the  State;  or  when  the  decedent  was  a  nonresident  of  the  State  at  the  time  of 
his  death,  if  the  property  is  within  the  State:  or  when  the  transfer  is  of  property 
made  by  a  resident,  or  by  a  nonresident  whose  property  is  within  the  State,  by 
deed,  grant,  bargain,  sale,  or  gift,  made  in  contemplation  of  the  death  of  the 
grantor  or  intended  to  take  effect  after  death,  with  the  following  exception: 

When  the  property  passes  by  such  transfer  to  or  for  the  use  of  a  father, 
mother,  husband,  wife,  child,  brother,  sister,  wife  or  widow  of  a  son  or  the 
husband  of  a  daughter,  or  to  or  for  the  use  of  any  lineal  descendent  of  such 
decedent  or  grantor  born  in  lawful  wedlock,  such  transfer  of  property  is  not  tax- 
able under  this  act,  unless  it  is  personal  property  of  the  value  of  $5,000  or  more, 
in  which  case  it  is  taxable  at  1  per  cent  of  the  clear  market  value  of  such  property 
in  excess  of  $5,000.  Provision  is  made  for  the  collection  of  such  taxes  and  their 
payment  into  the  State  treasury  and  application  to  payment  of  interest  on  the 
educational  funds  as  other  specific  taxes  are  applied. 

The  constitutionality  of  this  act  has  been  sustained  by  the  supreme  court  of  the 
State  in  a  recent  decision. 

The  law  went  into  effect  so  recently  that  the  amount  of  revenues  that  will  be 
obtained  can  not  be  stated. 


ILLINOIS. 

The  system  of  taxation  which  obtains  in  Illinois  is  that  of  the  general  property 
tax  which  has  prevailed  since  the  organization  of  the  State. 

The  distinguishing  feature  is  the  local  assessment  of  all  real  and  personal  prop- 
erty at  a  "fair"'  cash  value  in  "the  county,  town,  city,  or  district  where  it  is 
usually  kept/' 

The  intent  and  purpose  of  the  whole  system  of  revenue  laws  seem  to  be  to  bring 
all  kinds  of  property,  individual  or  corporate,  upon  the  assessment  rolls  of  the 
various  local-assessing  districts  at  a  uniform  rate  of  taxation  for  State  and  local 
revenues. 

These  laws  provide  for  the  taxation  of  corporate  property,  whether  of  private 
or  quasi-public  corporations,  in  the  same  manner  that  the  property  of  individuals 
is  assessed  and  taxed.  That  is,  all  corporations  doing  business  in  the  State  are 
subject  to  assessment  and  taxation  on  all  their  tangible  property  at  the  place  or 
places  where  the  property  is  located. 

The  capital  stock  of  all  companies  and  associations  incorporated  under  the  laws 
of  Illinois,  except  those  for  purely  manufacturing  purposes,  the  mining  and  sale 
of  coal,  printing  or  publication  of  newspapers,  or  the  improving  or  breeding  of 
stock,  is,  however,  subject  to  assessment  for  its  value,  to  be  ascertained  by  the 
State  board  of  equalization,  deducting  therefrom  the  assessed  value  of  the  tangible 
property  assessed  by  local  assessors. 

The  valuation  of  capital  stock  in  excess  of  the  valuation  of  tangible  property  of 
corporations  is,  however,  apportioned  for  taxation  among  the  various  local  assess- 
ment rolls  and  added  to  that  of  the  tangible  property  valuations  assessed  locally, 
so  that  all  assessments,  State  and  local,  appear  on  the  local  assessment  rolls,  and 
the  rates  of  taxation  authorized  by  the  laws  are  extended  upon  such  valuation. 

The  taxes  extended  against  the  property  and  capital  stock  and  franchises  of 
corporations,  being  thus  mingled  with  those  upon  the  assessed  valuation  of  other 
property  in  that  State,  are  not,  as  a  rule,  separately  tabulated  by  the  public  officials 
of  the  State,  and  it  is  therefore  difficult  to  present  in  a  satisfactory  manner  the 
results  of  the  system  of  taxation  as  to  the  property  of  corporations. 

From  this  general  statement  it  will  appear  that  whatever  defects  of  underval- 
uation or  omission  of  property  from  the  assessment  rolls  exist  will  extend  to  all 
classes  of  taxable  property. 

CONSTITUTIONAL  RESTRICTIONS. 

The  constitution  of  the  State  places  some  limitations  upon  the  power  of  the 
legislature  in  matters  of  taxation,  declaring  that  the  general  assembly  shall  pro- 
vide such  revenue  as  may  be  needful  by  levying  a  tax  by  valuation,  so  that  every 
person  and  corporation  shall  pay  a  tax  in  proportion  to  property  valuation  to  be 
ascertained  by  persons  selected  in  such  manner  as  the  assembly  shall  direct,  and 
not  otherwise;  and  authorizing  various  occupations,  franchises,  and  privileges  to 
be  taxed  in  addition. 

Property,  in  the  constitution  and  revenue  laws  of  the  State,  is  held  by  the  courts 
to  include  all  values.  While  under  these  provisions  of  the  constitution  the  reve- 
nue laws  of  the  State  have  apparently  been  framed  to  bring  all  species  of  property 
under  the  general  rule  laid  down,  intended  to  apportion  the  tax  upon  the  actual 
appraised  value  of  all  property,  the  constitution  as  construed  by  the  courts  per- 
mits some  diversity  of  methods  in  the  taxation  of  property  and  business,  and  gives 
considerable  flexibility  to  the  general  rule. 

For  instance,  it  has  been  held  that  it  is  within  the  power  of  the  legislature  to 
exempt  property  from  taxation  or  to  commute  the  general  rate  for  a  fixed  sum, 
and  the  exceptional  provision  in  the  charter  of  the  Illinois  Central  Railroad  exempt- 
ing its  property  from  general  taxation  upon  payment  of  a  certain  rate  of  taxation 
fixed  by  law  upon  its  gross  earnings,  has  been  sustained  as  being  within  the 
restrictions  of  the  constitution.  (17  111.  Rep.,  291.) 

119 


120  INDUSTRIAL    COMMISSION. 

LOCAL  ASSESSMENT  SYSTEM. 

The  revenue  laws  of  Illinois  provide  that  the  following  classes  of  property, 
except  such  as  may  be  exempt  by  law,  shall  be  assessed  and  taxed: 

First.  All  real  and  personal  property  in  the  State. 

Second.  All  moneys,  credits,  bonds  or  stocks,  and  other  investments,  all  shares 
of  stock  of  incorporated  companies,  and  all  other  personal  property,  including 
property  in  transitu,  owned  or  controlled  by  persons  residing  in  the  State. 

Third.  Shares  or  capital  stock  of  banks  or  banking  companies  doing  business  in 
the  State. 

Fourth.  The  capital  stock  of  companies  and  associations  incorporated  under  the 
laws  of  the  State  shall  be  assessed  and  taxed,  except  the  property  for  public  and 
charitable  purposes  which  is  exempt  from  taxation. 

The  real  property  subject  to  taxation,  whether  owned  by  individuals  or  corpora- 
tions, is  assessed  locally  where  the  property  is  situated,  "  valued  at  its  fair  cash 
value,  estimated  at  the  price  it  would  bring  at  a  fair  voluntary  sale."  In  valuing 
any  property  on  which  there  is  a  coal  or  other  mine,  or  stone  or  other  quarry,  the 
same  is  valued  at  such  a  price  as  such  property,  including  the  mine  or  quarry, 
would  sell  at  a  fair  voluntary  sale  for  cash. 

A  recent  statute  provides  that  all  real  property  shall  be  listed  and  assessed  for 
the  year  1899  and  every  fourth  year  thereafter,  which  assessment  shall  be  known 
as  the  general  assessment,  and,  modified,  equalized,  or  changed,  as  provided  by 
law,  shall  be  the  assessment  upon  which  taxes  shall  be  levied,  and  during  the 
quadrennial  period  for  which  the  same  is  made. 

PERSONAL  PROPERTY. 

Personal  property  subject  to  taxation  is  valued  as  follows: 

First.  All  personal  property,  except  as  herein  otherwise  directed,  shall  be  valued 
at  the  fair  cash  value. 

Second.  Every  credit  for  a  certain  sum  shall  be  valued  at  a  fair  cash  value. 

Third.  Annuities  and  royalties  shall  be  valued  at  their  present  total  value.       % 

Fourth.  The  capital  stock  of  all  companies  of  the  State,  except  those  required 
to  be  assessed  by  local  assessors,  is  valued  by  a  State  board  of  equalization,  so  as 
to  determine  the  fair  cash  value  of  such  capital  stock,  including  the  franchises, 
over  arid  above  the  assessed  value  of  the  tangible  property  of  such  companies, 
in  all  cases  where  the  tangible  property  or  capital  stock  of  any  corporation  is 
assessed  or  taxed  in  the  State.  This  clause  does  not  apply  to  capital  stock  or 
shares  of  banks,  and  there  is  a  further  provision  that  companies  organized  for 
purely  manufacturing  purposes,  or  for  the  mining  and  sale  of  coal,  or  printing  or 
publishing  of  newspapers,  or  for  the  improving  or  breeding  of  stock,  shall  be 
assessed  by  local  assessors  in  like  manner  as  the  property  of  individuals  is  assessed. 

LISTING. 

The  listing  system  is  a  distinguishing  feature  in  Illinois  taxation.  Every  person 
of  full  age,  being  a  resident  of  the  State,  is  required  to  list  all  his  moneys,  credits, 
bonds,  or  stocks,  shares  of  stock  of  joint  stock  or  other  companies  (when  the 
capital  stock  of  such  company  is  not  assessed  in  this  State),  moneys  loaned  or 
invested,  annuities,  franchises,  royalties,  and  other  personal  property,  and  also 
all  moneys  q,nd  other  personal  property  invested,  loaned,  or  controlled  as  agent  or 
attorney,  or  on  account  of  any  other  person  or  company,  and  the  moneys  deposited 
subject  to  his  order,  check,  or  draft,  or  credits  due  from  or  owing  by  any  person 
or  corporation. 

Personal  property  is  listed  and  assessed  in  the  county,  town,  city,  village,  or 
district  where  the  owner  resides,  except  such  as  is  specially  required  to  be  listed 
and  assessed  otherwise. 

The  capital  stock  and  franchises  of  corporations  or  franchises  held  by  individual 
persons,  except  as  otherwise  provided,  are  listed  where  the  place  of  business  is 
located. 

The  property  of  manufacturers  and  others  in  the  hands  of  an  agent  is  listed 
where  the  business  of  such  agent  is  carried  on. 

Personal  property  in  transitu  is  listed  and  assessed  where  the  owner  resides. 

The  personal  property  of  banks  or  bankers,  brokers,  stockjobbers,  insurance 
companies,  hotels,  livery  stables,  saloons,  eating  houses,  merchants,  manufactur- 
ers, ferries,  mining  companies,  and  companies  not  especially  provided  for,  is  listed 
and  assessed  where  the  business  is  carried  on. 


TAXATION    IN    ILLINOIS.  121 

The  personal  property  of  gas  and  coke  companies,  except  the  pipes  laid  down, 
is  listed  and  assessed  where  the  principal  works  are  located.  Gas  mains  and 
pipes  laid  in  roads,  streets,  or  alleys  are  held  to  be  personal  property,  and  listed  and 
assessed  in  the  town,  district,  city,  or  village  where  the  same  are  laid. 

The  personal  property  of  street  railroad,  plank  road,  gravel  road,  turnpike,  or 
bridge  companies  is  listed  and  assessed  in  the  county,  town,  district,  village,  or 
city  where  the  principal  place  of  business  is  located.  The  track,  road,  or  bridge 
is  held  to  be  personal  property  and  listed  where  located. 

The  horses,  stages,  and  other  personal  property  of  stage  companies  or  persons 
operating  stage  lines  are  listed  and  assessed  in  the  county,  town,  city,  or  district 
where  they  are  usually  kept. 

And  so  with  the  personal  property  of  express  or  transportation  companies. 

A  deed  of  real  estate,  held  as  seciirity  for  the  payment  of  a  sum  of  money,  is 
regarded  as  personal  property  and  listed  and  assessed  as  credits. 

Persons  having  personal  property  are  required  to  make  out,  under  oath,  a  sched- 
ule of  the  numbers,  amounts,  quantity,  and  quality  of  all  personal  property  in 
their  possession  or  under  their  control  required  to  be  listed  for  taxation. 

It  is  the  duty  of  the  assessor  to  determine  and  fix  the  fair  cash  value  of  all  items 
of  personal  property,  including  all  grain  on  hand.  In  assessing  notes,  bonds, 
accounts,  and  moneys  he  is  governed  by  the  rules  of  uniformity  that  he  adopts  in 
assessing  other  personal  property. 

If  any  person  refuses  to  make  such  schedule  under  oath,  the  assessor  lists  his 
property  according  to  his  best  judgment  and  information,  and  adds  to  the  value 
of  such  list  an  amount  equal  to  50  per  cent  of  such  value,  and  severe  penalties  are 
imposed  for  making  false  schedules  or  refusing  or  neglecting  to  make  them  upon 
request. 

FORM   OF  SCHEDULE. 

The  schedule,  when  completed  by  the  assessor,  contains,  in  separate  columns, 
the  enumeration  of  such  property  and  the  value  thereof. 

First.  The  number  of  horses,  all  ages. 

Second.  The  number  of  cattle,  all  ages. 

Third.  The  number  of  mules  and  asses,  all  ages. 

Fourth.  The  number  of  sheep  of  all  ages. 

Fifth.  The  number  of  hogs  of  all  ages. 

Sixth.  Every  steam  engine,  including  boilers. 

Seventh.  Every  fire  or  burglar  proof  safe. 

Eighth.  Every  billiard  or  other  similar  table. 

Ninth.  Every  carriage  or  wagon,  of  whatever  kind. 

Tenth.  Every  watch  and  clock. 

Eleventh.  Every  sewing  or  knitting  machine. 

Twelfth.  Every  piano  forte. 

Thirteenth.  Every  melodeon  and  organ. 

Fourteenth.  Every  franchise  and  description  thereof. 

Fifteenth.  Every  annuity  and  royalty  and  description  thereof. 

Sixteenth.  Every  patent  right  and  description. 

Seventeenth.  Every  steamboat,  sailing  vessel,  wharf  boat,  barge,  or  other  water 
craft. 

Eighteenth.  The  value  of  merchandise  on  hand. 

Nineteenth.  The  value  of  material  and  manufactured  articles  on  hand. 

Twentieth.  The  value  of  manufacturer's  tools,  implements,  and  machinery 
(other  than  boilers  and  engines,  which  shall  be  listed  as  such). 

Twenty-first.  The  value  of  agricultural  tools,  implements,  and  machinery. 

Twenty-second.  The  value  of  gold  or  silver  plate  and  plated  ware. 

Twenty-third.  The  value  of  diamonds  and  jewelry. 

Twenty-fourth.  The  amount  of  moneys  of  bank,  banker,  broker,  or  stock 
jobber. 

Twenty-fifth.  The  amount  of  credits  of  bank,  banker,  broker,  or  stock 
jobber. 

Twenty-sixth.  The  amount  of  moneys  other  than  of  bank,  banker,  broker,  or 
stock  jobber. 

Twenty-seventh.  The  amount  of  credits  other  than  of  bank,  banker,  broker,  or 
stock  jobber. 

Twenty-eighth.  The  amount  and  value  of  bonds  or  stocks. 

Twenty-ninth.  The  amount  and  value  of  shares  of  capital  stock  of  companies 
and  associations  not  incorporated  by  the  laws  of  this  State. 

Thirtieth.  The  value  of  such  property  such  person  is  required  to  list  as  pawn- 
broker. 


122  INDUSTRIAL    COMMISSION. 

Thirty-first.  The  value  of  property  of  companies  and  corporations  other  than 
property  hereinbefore  enumerated. 

Thirty-second.  The  value  of  bridge  property. 
Thirty-third.  The  value  of  property  of  saloons  and  eating  houses. 
Thirty-fourth.  The  value  of  household  or  office  furniture  and  property. 
Thirty-fifth.  The  value  of  investments  in  real  estate  and  improvements  thereon. 
Thirty-sixth.  The  value  of  all  property  required  to  be  listed. 

DEBTS  DEDUCTED  FROM  CREDITS. 

In  making  up  the  amounts  of  credits  which  any  person  is  required  to  list  for 
himself  or  any  other  person,  company,  or  corporation  he  is  entitled  to  deduct 
from  the  gross  amount  of  credits  the  amount  of  all  bona  fide  debts,  except  in  the 
case  of  banks  or  tfrose  exercising  banking  powers  or  privileges.  Such  deductions 
are  verified  by  the  oath  of  the  persons  claiming  the  same. 

MUTUAL  BUILDING  AND  LOAN  ASSOCIATION  STOCK. 

Stockholders  of  these  associations,  whether  organized  under  the  laws  of  this 
State  or  any  other  State,  list  for  taxation  with  the  local  assessors  where  they 
reside  the  number  of  shares  of  stock  owned  and  the  value  thereof,  which  are 
assessed  and  taxed  as  other  personal  property. 

In  determining  the  value  of  such  stock  for  the  purpose  of  taxation  the  value 
of  the  real  estate  owned  by  the  association  is  first  deducted  from  its  assets,  and 
such  real  estate  assessed  as  other  real  estate. 

PROPERTY  OF  BANKS,  BANKERS,  BROKERS,  AND  STOCK  JOBBERS. 

These  persons  or  corporations  are  required  to  make  out  and  furnish  the  assessor 
a  sworn  statement  showing: 

First.  The  amount  of  money  on  hand  or  in  transit. 

Second.  The  amount  of  funds  in  the  hands  of  other  banks  or  others  subject  to 
draft. 

Third.  The  amount  of  checks  or  other  cash  items  not  included  in  the  foregoing. 

Fourth.  The  amount  of  bills  receivable,  discounted,  or  purchased,  and  other 
credits. 

Fifth.  The  amount  of  stocks  and  bonds  of  every  kind  and  shares  of  capital 
stock  of  other  companies  held  as  an  investment  or  in  any  way  representing  assets. 

Sixth.  All  other  property  appertaining  to  said  business  other  than  real  estate 
(which  real  estate  is  listed  and  assessed  as  other  real  estate) . 

Seventh.  The  amount  of  all  deposits. 

Eighth.  The  amount  of  all  accounts  payable  other  than  current  deposit  accounts. 

Ninth.  The  amount  of  bonds  and  other  securities  exempt  by  law  from  taxation. 

The  aggregate  amount  of  the  first,  second,  and  third  items  in  said  statement 
is  listed  as  moneys.  The  amount  of  the  sixth  item  is  listed  the  same  as  other 
personal  property.  The  aggregate  amount  of  the  seventh  and  eighth  items  is 
deducted  from  the  aggregate  amount  of  the  fourth  item,  and  the  amount  of  the 
remainder,  if  any,  is  listed  as  credits.  The  aggregate  amount  of  the  ninth  item 
is  deducted  from  the  aggregate  amount  of  the  fifth  item,  and  the  remainder  listed 
as  bonds  and  stocks. 

PAWNBROKERS. 

All  property  held  in  pledge  or  security  for  money  by  pawnbrokers  is  listed  and 
taxes  charged  to  the  pawnbrokers  on  the  fair  cash  value  of  such  property. 

CAPITAL  STOCK  OF  CORPORATIONS  AND  FRANCHISES  OF  PERSONS. 

Bridge,  express,  ferry,  gravel  road,  gas,  insurance,  mining,  plank  road,  stage, 
steamboat,  street  railroad,  transportation,  turnpike,  and  other  companies  incor- 
porated under  the  laws  of  this  State  other  than  banks,  and  the  corporations 
required  to  be  assessed  by  local  assessors,  in  addition  to  other  property  listed,  are 
required  to  make  out  and  deliver  to  the  assessor  a  sworn  statement  setting  forth: 

First.  Name  and  location. 

Second.  Amount  of  capital  stock  authorized  and  number  of  shares. 

Third.  The  amount  of  capital  stock  paid  up. 

Fourth.  The  market  value,  or  if  no  market  value,  then  the  actual  value  of  the 
shares  of  stock. 


ILLINOIS    CORPORATION    TAXES.  123 

Fifth.  The  total  amount  of  indebtedness,  except  that  for  current  expenses. 

Sixth.  The  assessed  valuation  of  all  tangible  property. 

Such  statements  are  scheduled  by  the  local  assessor  and  returned  to  the  county 
clerk,  by  him  forwarded  to  the  State  auditor,  and  by  him  laid  before  the  State 
board  of  equalization,  which  values  and  assesses  such  capital  stock. 

Every  person  owning  or  using  a  franchise  granted  by  any  law  of  the  State  is 
required  to  list  same  as  personal  property,  giving  the  total  value  thereof. 

STATE  AND  NATIONAL  BANKS. 

The  stockholders  in  every  bank,  State  and  National,  located  within  the  State, 
are  assessed  and  taxed  on  the  value  of  their  shares  of  stock  therein  in  the  place 
where  the  bank  is  located  and  not  elsewhere.  Such  shares  are  listed  and  assessed 
subject  to  the  restriction  that  taxation  of  such  shares  shall  not  be  at  a  greater  rate 
than  of  any  other  moneyed  capital  in  the  hands  of  individual  citizens  of  the  State 
of  the  place  where  such  bank  is  located. 

In  each  bank  is  kept  a  full  and  correct  list  of  names  and  residences  of  its  stock- 
holders and  number  of  shares  held  by  each,  which  list  is  subject  to  inspection  of 
assessors.  And  it  is  the  duty  of  the  assessor  to  ascertain  and  report  to  the  county 
clerk  a  correct  list  of  the  names  and  residences  of  all  stockholders,  with  the  num- 
ber and  assessed  value  of  all  such  shares  held  by  each. 

The  county  clerk  to  whom  such  returns  are  made  enters  the  valuations  of  such 
shares  on  the  tax  list,  and  the  names  of  the  respective  owners  of  the  same,  and 
computes  and  extends  taxes  thereon  the  same  as  against  the  valuation  of  other 
property  in  the  same  locality. 

For  the  purpose  of  collecting  such  taxes  it  is  the  duty  of  every  such  bank  to 
retain  so  much  of  every  dividend  belonging  to  the  stockholders  as  may  be  neces- 
sary to  pay  any  taxes  levied  upon  their  shares,  or  until  it  is  made  to  appear  to  such 
bank  that  such  taxes  have  been  paid;  and  if  said  taxes  shall  not  be  paid  the  col- 
lector of  taxes  where  such  bank  is  located  is  empowered  to  sell  said  shares  to  pay 
the  same  like  other  personal  property. 

RAILROADS. 

Every  person,  company,  or  corporation  owning,  operating,  or  constructing  a 
railroad  in  this  State  is  required  in  the  month  of  May  in  each  year  to  make  out 
and  file  with  the  county  clerks  in  the  respective  counties  in  which  the  railroad 
may  be  located  a  statement  or  schedule,  under  oath,  showing  the  property  held 
for  right  of  way  and  the  length  of  the  main  and  all  side  and  second  tracks  and 
turnoiits  in  such  county  and  in  each  city,  town,  or  village  through  or  into  which 
the  railroad  may  run,  describing  each  tract  of  land  in  manner  provided  by  the 
law  and  stating' the  value  of  improvements  located  on  the  right  of  way. 

Such  right  of  way,  including  the  superstructure  of  main,  side,  or  second  track 
and  turnouts  and  the  stations  and  improvements  of  such  company  on  such  right  of 
way,  is  held  to  be  real  estate  for  the  purposes  of  taxation,  and  denominated  "  rail- 
road track,"  and  is  so  listed  and  valued. 

The  value  of  such  "  railroad  track  "  is  listed  and  taxed  in  the  several  counties, 
towns,  villages,  districts,  and  cities  in  the  proportion  that  the  length  of  main 
track  in  such  place  bears  to  the  whole  length  of  the  road  in  the  State,  except  that 
the  value  of  the  side  or  second  track,  and  of  all  station  houses,  depots,  machine 
shops,  or  other  buildings  belonging  to  the  road,  is  assessed  in  the  county,  town, 
village,  district,  or  city  in  which  they  are  located. 

The  movable  property  belonging  to  a  railroad  company  is  held  to  be  personal 
property,  and  denominated,  for  the  purpose  of  taxation,  "  rolling  stock.''  Each 
railroad  is  required  to  return  a  list  or  schedule  each  year,  containing  a  correct 
detailed  inventory  of  all  its  rolling  stock,  which  must  distinctly  set  forth  the 
number  of  locomotives  of  all  classes,  passenger  cars  of  all  classes,  sleeping  and 
dining  cars,  express  cars,  baggage  cars,  horse  cars,  and  all  other  kinds  of  cars. 

This  "  rolling  stock  "  is  listed  and  taxed  in  the  several  counties,  towns,  villages, 
districts,  and  cities  in  the  proportion  that  the  length  of  the  main  track  used  or 
operated  in  the  county,  town,  village,  district,  or  city  bears  to  the  whole  length 
of  the  line  used  or  operated. 

The  tools  and  materials  for  repairs,  and  all  other  personal  property  of  any  rail- 
road, except  "rolling  stock,"  is  listed  and  assessed  in  the  county,  town, village, 
district,  or  city  where  the  same  may  be  on  the  1st  day  of  May.  All  real  estate, 
including  the  stations  and  other  buildings  and  structures  thereon,  other  than  that 
denominated  "  railroad  track, "is  listed  as  lands  or  lots,  as  the  case  may  be,  where 
the  same  is  located. 


124  INDUSTRIAL    COMMISSION. 

The  county  clerk  returns  to  the  assessor  of  the  town  or  district  a  copy  of  the 
schedule  or  list  of  the  real  estate  other  than  "  railroad  track,"  and  such  real  and 
personal  property  is  assessed  by  the  assessor.  Such  property  is  treated  in  all 
respects  in  regard  to  assessment  and  equalization  the  same  as  other  similar  prop- 
erty belonging  to  individuals,  except  that  it  is  treated  as  property  belonging  to 
railroads,  under  the  terms,  "lands/'  "lots,"  and  personal  property. 

At  the  same  time  that  the  lists  or  schedules  above  referred  to  are  returned  to 
the  county  clerks,  each  railroad  is  required  to  return  to  the  auditor  of  public 
accounts  sworn  statements  or  schedules  as  follows: 

First.  Of  the  property  denominated  "railroad  track,'"  giving  the  length  of  the 
main  and  side  or  second  tracks  and  turnouts,  and  showing  the  proportion  in  each 
county,  and  the  total  in  the  State. 

Second.  The  "  rolling  stock,"  giving  the  length  of  the  main  track  in  each  county, 
the  total  in  this  State,  and  the  entire  length  of  the  road. 

Third.  Showing  the  number  of  ties  in  track  per  mile;  the  weight  of  iron  or  steel 
per  yard  used  in  main  or  side  tracks;  what  joints  or  chairs  are  used  in  track:  the 
ballasting  of  road,  whether  gravel  or  dirt;  the  number  and  quality  of  buildings 
and  other  structures  on  "railroad  track:"  length  of  time  iron  in  track  has  been 
used,  and  the  length  of  time  road  has  been  built. 

Fourth.  A  statement  or  schedule  showing — 

(1)  The  amount  of  capital  authorized  and  the  number  of  shares  into  which  such 
capital  stock  is  divided. 

(2)  The  amount  of  capital  stock  paid  up. 

(3)  The  market  value,  or  if  no  market  value,  then  the  actual  value  of  the  shares 
of  stock. 

(4)  The  total  amount  of  indebtedness,  except  for  current  expenses  for  operating 
the  road. 

Fifth.  The  total  listed  valuation  of  all  its  tangible  property  in  this  State. 

A  penalty  for  failure  to  make  the  list  or  schedule  required  is  imposed. 

The  auditor  lays  the  statements  and  schedules  required  to  be  returned  to  him 
before  the  State  board  of  equalization,  which  assesses  the  property  in  manner 
above  described. 

The  county  clerk  enters  in  books  provided  for  the  purpose,  under  proper  head- 
ings, the  property  of  all  railroads  listed  for  taxation,  and  enters  the  valuations  as 
assessed,  corrected,  and  equalized,  and  against  such  valuation  extends  all  taxes 
for  which  said  property  is  liable,  and  delivers  said  book  to  the  county  collector, 
who  collects  the  taxes  therein  charged  against  railroad  property  and  pays  over 
and  accounts  for  the  same  as  in  other  cases. 

The  State  board  of  equalization  assesses  railroad  property  denominated  as 
"  railroad  track  "  and  "rolling  stock,"  and  is  given  power  of  authority  to  examine 
persons  and  papers.  The  amount  so  determined  and  assessed  is  certified  by  the 
auditor  to  the  county  clerk  of  each  county,  who  in  like  manner  distributes  the 
values  so  certified  by  the  auditor  to  the  several  towns,  districts,  villages,  and  cities 
in  the  county  entitled  to  a  proportionate  value  of  such  "railroad  track"  and 
"  rolling  stock."  The  clerk  extends  taxes  against  said  values  the  same  as  against 
other  property  in  such  towns,  districts,  villages,  and  cities. 

The  aggregate  amount  of  capital  stock  of  railroad  companies  assessed  by  said 
board  is  distributed  proportionately  to  the  several  counties  in  like  manner  as 
the  property  denominated  "railroad  tracks"  is  distributed,  the  amount  being  cer- 
tified by  the  auditor  to  the  county  clerks  of  the  proper  counties,  and  by  them 
extended  and  distributed  as  above  set  forth. 

A  tabular  statement  of  the  amount  of  taxes  charged  for  collection  against  the 
equalized  assessed  valuation  of  railroad  property  in  the  State  for  the  year  1898, 
taken  from  reports  made  to  the  auditor  of  public  accounts  by  the  county  clerks  of 
the  several  counties,  shows: 
Total  value  of  all  property,  real  and  personal,  assessed  by  State 

board  of  equalization $76,554,845.00 

Total  assessed  by  local  assessors •- . .        2, 069, 191. 00 

Total  assessment  of  railroad  property 78, 624, 036. 00 

Total  amount  of  State  tax 439,177.37 

Total  amount  of  county  and  all  other  local  taxes -      3, 453, 978. 72 

Total  railroad  tax  for  the  year 3,893,156.09 

Aggregate  of  tax  per  mile  of  railroad 392. 16 


ILLINOIS    CORPORATION    TAXES.  125 

Tiiis  assessment  of  railroad  property  for  1899  was  divided  into  classes  as  follows: 


Full  value. 

Assessed 
value  (one- 
fifth)  . 

Main  track  

$229,  528,  635 

845,  905,  727 

Second  main  track  

20  347  850 

4  069  570 

Side  or  turn-out  track 

48  320  500 

9  664  100 

Buildings  on  right  of  way  

15,  334,  930 

3,  066,  986 

Rolling  stock                     

66  528  295 

13  305  659 

Total  

380,  060,  210 

76  012  042 

Assessed  bv  local  assessors  

3  060  632 

79,  072,  674 

The  total  assessment  per  mile  of  road  is  $7,652. 

To  the  foregoing  taxes  must  be  added  those  of  the  Illinois  Central  taxed  under 
special  charter  provisions. 

ILLINOIS   CENTRAL  RAILROAD. 

In  consideration  of  the  grants,  privileges,  and  franchises  conferred  upon  this 
company,  it  is  by  its  charter  required  on  the  first  Monday  of  December  and  June 
of  each  year  to  pay  into  the  treasury  of  the  State  of  Illinois  5  per  cent  of  the 
gross  or  total  proceeds,  receipts,  or  income  derived  from  the  6  months  then  next 
preceding,  and  for  the  purpose  of  ascertaining  the  proceeds  an  accurate  account 
must  be  kept  by  said  company  and  a  copy  thereof  shall  be  furnished  to  the  gov- 
ernor of  the  State;  the  truth  of  which  account  must  be  verified  by  the  affidavits 
of  the  treasurer  and  secretary  for  the  purpose  of  verifying  and  ascertaining  the 
accuracy  of  such  account,  power  being  given  for  the  examining  of  the  books  and 
papers,  and  for  the  examining  under  oath  of  officers,  employers,  employees  of 
said  company,  or  other  persons. 

The  stock,  property,  and  assets  belonging  to  said  company  are  required  to  be  listed 
by  an  officer  of  the  company  with  the  auditor  of  State ,"  and  an  annual  tax  for 
State  purposes  is  assessed  by  the  auditor  upon  all  the  property  and  assests  of 
every  kind  belonging  to  said  corporation.  Whenever  the  taxes  so  levied  for  State 
purposes  exceed  three-fourths  of  1  per  cent,  such  excess  is  deducted  from  the  percent- 
age of  gross  receipts  or  income  required  to  be  paid  by  said  corporation  to  the  State, 
and  it  is  exempted  from  all  other  taxation  of  every  kind.  The  revenue  arising  from 
said  taxes  and  the  said  5  per  cent  of  the  gross  receipts  is  paid  into  the  State  treas- 
ury in  money  and  applied  to  the  payment  of  the  interest-paying  State  indebted- 
ness; and  it  is  further  provided  that  in  case  the  5  percent  on  gross  receipts  and 
the  State  taxes  paid  by  this  corporation  do  not  amount  to  7  per  cent  of  the  gross 
receipts,  said  company  shall  pay  into  the  treasury  of  the  State  the  difference,  so 
as  to  make  the  whole  amount  paid  equal  at  least  to  7  per  cent  of  its  gross  receipts. 

Under  this  law  this  railroad  company  pays  7  per  cent  of  its  gross  income,  and 
the  amounts  paid  are  as  follows: 

For  six  months  ending — 

October  31, 1897 $326,577.69 

April  30,1898 322,505.80 


649,083.49 


TELEGRAPH  COMPANIES. 


Each  telegraph  company  is  required  to  return  to  the  auditor  of  public  accounts 
an  annual  schedule  or  statement  showing: 

1.  The  amount  of  capital  stock  authorized  and  the  number  of  shares. 

2.  The  amount  of  capital  stock  paid  up. 

3.  The  market  value,  or  if  no  market  value,  then  the  actual  value  of  the  shares. 

4.  The  total  amount  of  all  indebtedness,  except  current  expenses  for  operating 
the  line. 

5.  The  length  of  line  operated  in  each  county  and  the  total  in  the  State. 

6.  The  total  assessed  valuation  of  all  its  tangible  property  in  the  State. 
These  statements  are  laid  before  the  State  board  of  equalization,  which  assesses 

the  capital  stock  of  each  stock  company,  deducting  the  assessed  value  of  property 
locally  taxed.    The  tax  charged  on  the  capital  stock  is  placed  in  the  hands  of 


126  INDUSTRIAL    COMMISSION. 

county  collectors,  in  a  book  provided  for  that  purpose,  the  same  as  is  required  for 
railroad  property. 

The  office  furniture  and  other  personal  property  of  such  companies  is  listed  and 
assessed  in  the  county,  town,  district,  village,  or  city  where  the  same  is  used  or 
kept. 

The  aggregate  amount  of  capital  stock  of  telephone  companies  assessed  by  said 
board  is  distributed  proportionately  among  the  several  counties  entitled  to  a  pro- 
portionate value  of  such  stock  and  the  tax  extended  and  distributed  by  the  county 
clerks  to  the  several  towns,  etc. 

INSURANCE  COMPANIES. 

Every  agent  of  any  insurance  company  is  required  to  return  to  the  proper 
officer  of  the  county,  town,  or  municipality  in  which  the  agency  is  established 
annually  the  amount  of  net  receipts  of  such  agency  for  the  preceding  year,  which 
is  entered  on  the  tax  list,  and  is  subject  to  the  same  rate  of  taxation  that  other 
personal  property  is  subject  to  at  the  place  where  located,  said  tax  being  in  lieu 
of  all  town  and  municipal  taxes. 

INHERITANCE  TAX. 

A  tax  is  imposed  upon  legacies  and  inheritances  passing  to  husband  or  wife  or 
lineal  descendants,  of  $1  on  every  $100  of  the  clear  market  value  of  such  property 
received  by  each  person,  providing  that  any  estate  valued  at  a  less  sum  than 
$20,000  shall  not  be  subject  to  any  such  taxes,  and  the  tax  is  levied  only  upon  the 
excess  of  $20,000,  received  by  each  person.  In  case  of  the  property  passing  to 
nearly  related  collateral  heirs,  the  tax  is  $2  on  every  $100  of  the  clear  market 
value  of  property  received  by  such  persons  in  excess  of  $2,000. 

In  all  other  cases  the  rate  is  as  follows:  On  each  and  every  $100  of  the  clear 
market  value  of  property  on  all  estates  of  $10,000  and  less,  $3;  on  all  estates  of 
over  $10,000  and  not  exceeding  $20,000,  $4;  on  all  estates  over  $20,000  and  not 
exceeding  $50,000,  $5,  and  on  all  estate's  over  $50,000,  $6— no  tax  being  imposed 
on  an  estate  valued  at  less  than  $500. 

ASSESSMENT  OF  PROPERTY. 

In  counties  not  under  township  organization  the  county  treasurer  is  ex-officio 
county  assessor,  and  with  the  advice  and  consent  of  the  county  board  divides  his 
county  into  convenient  districts  and  appoints  a  deputy  assessor  for  each. 

In  counties  under  township  organization  of  less  than  125,000  inhabitants  the 
county  treasurer  is  ex-officio '  supervisor  of  assessments  in  his  county;  he  must 
have  a  suitable  office,  in  which  the  assessment  books .  returned  to  him  are  kept, 
subject  to  inspection  of  all  persons,  and  with  the  advice  and  consent  of  the  county 
board  he  appoints  necessary  deputies  and  clerks,  whose  compensation  is  fixed  by  the 
county  board  and  paid  by  the  county.  In  such  counties  where  a  town  assessor 
is  unable  alone  to  perform  all  the  duties  of  his  office,  he  may,  by  the  advice  and 
consent  of  the  town  board  of  auditors,  appoint  suitable  persons  to  act  as  deputies. 

The  compensation  of  the  township  assessors  is  fixed  by  law  as  follows: 

In  townships  of  not  less  than  5,000  inhabitants,  not  less  than  $5  nor  more  than 
$10  per  day,  provided  that  in  townships  containing  more  than  15,000  inhabitants 
additional  compensation  can  be  allowed,  the  entire  compensation  not  to  exceed 
$1,000.  In  townships  of  less  than  5,000  inhabitants  they  receive  not  less  than 
$2.50  nor  more  than  $5  per  day. 

In  counties  containing  125,000  or  more  inhabitants  there  is  a  board  of  assessors 
consisting  of  5  persons  elected,  each  of  whom  receives  a  salary  of  $3,600  per  annum, 
which  board  has  power  to  employ  a  chief  clerk  and  such  other  clerical  help  as 
may  be  necessary,  such  chief  clerk  receiving  compensation  fixed  by  the  board  not 
exceeding  $10  per  day.  This  board  has  power  to  appoint  as  many  suitable  per- 
sons as  in  its  judgment  is  necessary  to  act  as  deputies,  whose  compensation  shall 
not  exceed  $5  per  day. 

The  law  provides  that  personal  property  shall  be  valued  at  its  fair  cash  value, 
less  such  deduction  as  is  allowed  by  law  to  be  made  from  credits,  which  value  is 
set  down  in  one  column  to  be  headed  "  full  value,"  and  one-fifth  part  shall  be  set 
down  in  another  column  headed  "  assessed  value." 

Real  property  is  valued  at  its  fair  cash  value,  estimated  at  the  price  it  would 
bring  at  a  voluntary  sale  in  the  due  course  of  trade,  and  one-fifth  of  this  is  placed 
in  another  column  which  is  headed  "  assessed  value." 


TAXATION    IN    ILLINOIS.  127 

The  State  board  of  equalization  follows  the  same  method  of  valuation  and 
division. 

The  one-fifth  value  of  all  property  so  ascertained  and  set  down  is  the  assessed 
value  for  all  purposes  of  taxation,  limitation  of  taxation,  and  limitation  of  ind 
edness  prescribed  in  the  constitution  or  any  statute. 

This  method  of  valuation  and  division  is  presumably  to  curb  borrowing  propen- 
sities of  municipalities,  and  we  are  informed  that  it  was  a  political  suggestion  for 
the  purpose  of  obtaining  popular  support  by  allaying  suspicion  of  increased  taxa- 
tion. 

The  county  clerks  in  the  several  counties  are  required  to  estimate  and  deter- 
mine the  rate  per  cent  upon  the  proper  valuation  of  the  property  in  the  respective 
towns,  townships,  districts,  cities,  and  villages  in  their  counties  that  will  produce 
not  less  than  the  net  amount  of  the  several  sums  required. 

INEQUALITIES  AND  INIQUITIES  IN  ASSESSMENT. 

If  laws  would  in  and  of  themselves  secure  full  and  uniform  assessment  of 
property,  and  equality  and  justice  in  taxation  under  the  general  property  tax,  it 
will  be  seen  that  these  results  should  obtain  in  Illinois.  The  fact  is,  however, 
that  no  State  in  the  Union  exhibits  greater  inequality,  discrimination,  and  injus- 
tice in  taxation  than  Illinois  under  this  system. 

The  laws  are  not  enforced,  each  assessor  being  regarded  as  "  a  law  unto  him- 
self." There  appears  to  be  the  greatest  discrimination  in  the  assessment  of  both 
individual  and  corporate  property,  while  enormous  masses  of  both  classes  escape 
taxation  entirely.  If  there  is  any  uniformity  in  the  assessment  of  property  it  is 
that  of  inequality,  discrimination,  and  concealment.  Charges  not  only  of  laxity 
and  unfairness,  but  of  venality,  against  assessors,  especially  in  Chicago  and  Cook 
County,  are  so  general  and  widespread  as  to  make  their  truthfulness  a  matter  of 
general  assumption. 

The  practice  in  assessment  of  property  discloses  not  only  competitive  under- 
valuation, escape,  and  disregard  of  all  laws  and  standards  by  assessors  generally 
throughout  the  State,  but  a  continual  strife  for  advantage  between  those  of  Chi- 
cago and  Cook  County,  where  a  large  proportion  of  the  wealth  of  the  State  is  cen- 
tered, and  those  in  the  "  other  counties  of  the  State,"  with  the  result  up  to  date 
greatly  in  favor  of  the  former. 

The  evils  and  absurdities  to  which  this  system  of  gross  undervaluation  and 
inequality  inevitably  leads,  are  especially  well  illustrated  in  Chicago,  where  it  is 
said  assessed  valuations  often  fall  as  low  as  one  hundredth  of  the  true  value  and 
bear  no  apparent  relation  to  any  fixed  basis. 

It  is  shown  that  equalized  assessed  valuation  of  real  estate  in  Cook  County  in 
1873  was  ,$228,399,663,  and  in  1893,  $210,048,322,  a  decrease  of  8.91  per  cent:  that  of 
personal  property  in  1873  was  $55,076,340,  and  in  1893,  $39,879,887,  a  decrease  of  27.59. 
During  the  period  from  1870  to  1890,  the  population  of  Cook  County  increased 
240.58  per  cent,-  and  it  is  fair  to  assume  that  the  increase  in  wealth  more  than  kept 
pace  with  the  growth  of  population. 

During  the  same  period  the  decrease  in  the  assessed  valuation  of  real  estate  out- 
side of  Cook  County  was  39.78  per  cent,  and  that  of  personalty  54.59  per  cent, 
although  the  increase  in  population  was  but  24.86  per  cent. 

It  is  stated  that  fifty  Chicago  concerns,  each  rated  from  one  to  several  millions, 
were  assessed  in  1897  at  a  total  of  less  than  $100,000. 

Ex-Senator  Charles  B.  Farwell  is  quoted  as  saying  with  respect  to  the  personal- 
property  assessment  of  a  well-known  north-side  man,  who,  from  his  age  and  experi- 
ence, had  to  a  great  extent  assumed  charge  and  direction  of  municipal  and  public 
morals,  that  he  had  personally  signed  and  verified  a  return  of  $2,600  of  personalty, 
while  his  financial  agent  had  invested  for  him  more  than  $600,000  in  mortgages 
alone;  and  of  another  neighbor  that  he  was  connected  with  a  business  enterprise 
paying  at  the  rate  of  6  per  cent  on  an  investment  of  $5,000,000,  yet  his  property 
appeared  upon  the  rolls  at  a  valuation  of  $18,000.  "  It  is  such  cases  as  this,"  Mr. 
Farwell  said,  "  that  shows  the  utter  futility  of  the  present  system." 

An  ex-corporation  attorney  of  Chicago  stated  in  a  public  address:  "  Equal  tax- 
ation is  now  impossible.  The  evil  of  venality  has  become  a  rank  scandal  in  our 
municipal  governments.  The  power  to  assess  at  one-tenth  or  one-hundredth  of 
the  cash  value  is  used  by  assessors  to  'touch'  property  owners."  A  member  of 
'  the  firm  of  Siegel,  Cooper  &  Co.  is  quoted  as  saying  "  There  is  one  day  in  the  year 
when  we  respectable  business  men  all  commit  perjury — that  is  the  day  when  we 
make  returns  to  the  assessor  respecting  the  amount  of  our  property." 

From  statements  of  27  Chicago  State  banks  in  1893  it  is  shown  that  the  net 
taxable  credits  amounted  to  $1,058,105.25,  while  the  net  credits  listed  amounted 


128  INDUSTRIAL    COMMISSION. 

to  $10,000,  a  difference  of  $1,048,105.25.  While  the  taxable  money  of  these  banks 
was  $18,991,771.67,  the  money  listed  by  all  banks  of  Chicago,  exclusive  of  National 
banks,  was  only  $43,925. 

Illustrations  of  similar  discrepancies  might  be  shown  with  reference  to  the 
assessment  of  other  moneys  and  credits. 

It  is  said  that  much  greater  discriminations  in  the  assessment  of  personalty, 
especially  that  of  an  intangible  character,  are  made  in  Cook  County  than  through- 
out the  rest  of  the  State. 

A  commission  of  prominent  real  estate  experts  appointed  by  Mayor  Swift, 
made  a  report  published  in  the  Chicago  Economist,  April  25,  1896,  relative  to  all 
the  real  estate  in  the  business  district  bounded  on  the  east  by  the  lake,  on  the 
north  and  west  by  the  Chicago  River,  and  on  the  south  by  Twelfth  street.  Exclu- 
sive of  railroad  property  and  land  exempt  from  taxation,  the  value  of  the  land 
was  found  to  be  $337,342,880  and  the  assessment  7.33  per  cent  of  this.  In  the 
^uburbs  the  rate  is  found  to  be  somewhat  higher,  while  in  the  rest  of  the  State 
the  rate  of  assessment  is  from  25  per  cent  to  35  per  cent  of  the  true  value. 

In  the  winter  of  1897  a  special  session  of  the  Illinois  general  assembly  was  held 
for  the  purpose  of  passing  a  new  revenue  law,  which  was  intended  to  remedy 
many  of  the  defects  in  assessment  complained  of  in  Chicago, ^ut  the  new  law 
does  not  seem  to  have  reached  the  root  of  the  evil,  as  the  total  assessed  valuation 
of  Cook  County  was  less  by  $17,623,946  in  1898  than  in  1897. 

The  defects  and  inconsistencies  in  the  assessment  of  capital  stock  and  tangible 
property  of  corporations  are  shown  by  reports  to  be  equally  glaring. 

For  instance,  Chicago  street  railways  are  shown  to  have  been  assessed  in  1896 
at  4.70  per  cent  of  the  par  value  of  their  outstanding  obligations  and  at  about 
3.23  per  cent  of  their  market  value. 

A  voluminous  report  on  taxation  was  issued  by  the  Imreau  of  labor  statistics  of 
Illinois  in  1894  and  1896,  containing  a  great  mass  of  statistical  information  upon  the 
subject  which  forms  the  basis  of  many  radical  and  questionable  conclusions,  and  is 
filled  with  somewhat  extravagant  and  emotional  disquisitions  of  the  author  upon 
nearly  every  conceivable  economic  subject.  While  the  contents  of  this  report 
must  be  taken  with  some  degree  of  allowance,  and  would  hardly  rank  as  authority 
in  taxation  literature,  in  it  is  shown  by  statistics  laboriously  gathered  from  vari- 
ous sources  the  utter  failure  of  the  Illinois  system  to  attain  anything  like  equal 
and  just  taxation  of  either  individual  or  corporate  property.  The  report  is 
declared  by  the  author  to  furnish  "  much  evidence  of  criminal  discrimination  in 
the  operation  of  the  present  revenue  system,  resulting  in  some  cases  in  practical 
confiscation  and  in  others  in  virtual  exemption  from  the  burdens  of  government," 
and  he  adds  that  "  whatever  may  be  the  variation  in  degree  the  iniquities  of  the 
taxation  system  of  this  State  are  common  to  all  other  States  and  countries  of  the 
civilized  world." 

Among  the  principal  remedies  proposed  in  the  report  is  that  State  and  local 
taxation  be  completely  divorced  by  confining  the  source  of  State  revenues  to  fran- 
chises. 

ASSESSMENT  OF  THE  CAPITAL  STOCK  OF  CORPORATIONS. 

The  following  is  a  statement  of  the  equalized  value  of  capital  stock  over  and 
above  the  equalized  value  of  tangible  property  of  corporations  other  than  rail- 
way companies  for  1899: 

Amount  of  capital  stock  paid  up  as  reported  by  companies $202, 470, 405 

Full  value  of  capital  stock  as  fixed  by  State  board  of  equalization  _  _     132, 575, 625 


Assessed  value  of  capital  stock  as  fixed  by  State  board  of  equaliza- 
tion (one-fifth) 26, 515, 125 

Equalized  value  of  tangible  property  assessed  by  local  assessors 24, 166, 922 

Net  assessment  of  capital  stock,  being  excess  of  equalized  value 
of  capital  stock  over  tangible  property,  assessed  by  local 
assessors 2, 348, 203 

In  1898  the  value  of  tangible  property  assessed  was  only  $12,260,575,  while  the 
capital  stock  in  excess  of  that  sum  was  only  $2,433,425. 

From  this  statement  it  seems  clear  that  the  greater  portion  of  the  vast  amount 
of  corporate  property,  tangible  and  intangible,  does  not  appear  on  the  rolls  at  all. 

The  amount  of  paid-up  capital  stock  of  corporations,  other  than  railroad  com- 
panies, is  exceedingly  small  for  such  a  wealthy  industrial  State  as  Illinois  com- 
pared with  that  obtained  through  methods  of  valuation  adopted  in  other  States, 
while  the  full  value  of  such  capital  stock  as  fixed  by  the  State  board  of  equaliza- 
tion is  only  about  two-thirds  of  the  capital  stock  value  as  reported  by  the  compa- 


TAXATION    IN    ILLINOIS.  129 

nies.  The  assessed  valuation  is  one-fifth  of  the  full  value  as  fixed  by  the  board, 
while  more  than  nine-tenths  of  the  assessed  valuation  represents  real  estate  and 
tangible  property,  and  less  than  one-tenth  represents  the  equalized  valuation  of 
all  capital  stock  in  excess  of  the  tangible  property  assessed  by  local  assessors 
who  see  it. 

This  system  would  therefore  appear  to  be  entirely  inadequate  for  the  just  and 
equal  taxation  of  corporate  property,  and  fails  to  impose  upon  such  property  a 
due  proportion  of  the  biirdens  of  government. 

The  tangible  property  of  corporations  is  practically  the  sole  basis  of  their  taxa- 
tion and  this  is  taxed  under  the  same  methods  applied  to  other  property,  which, 
even  though  all  such  property  were  reached  and  assessed  at  its  cash  value,  can 
hardly  be  regarded  as  an  adequate  measurement  of  the  ability  of  corporations  to 
pay. 

PERSONAL  PROPERTY  ASSESSED  IN  1899. 

Statement  of  property  assessed  for  the  year  1899  in  the  several  counties  as  returned 

to  the  auditor's  office. 

Horses..                                                                                                         ..  $10,127,085 

Cattle 11,350,995 

Mules  and  asses  .  957, 769 

Sheep 453,729 

Hogs  2,285,546 

Steam  engines  and  boilers _  _ 1, 345, 255 

Fire  and  burglar  proof  safes   _ .  _  181, 199 

Billiard,  etc. ,  tables 40, 546 

Carriages  and  wagons _ 2,791,644 

Watches  and  clocks 594, 872 

Sewing  and  knitting  machines. _ _ 583, 966 

Pianos 1, 206, 235 

Melodeons  and  organs _ 396, 306 

Franchises - 51 , 569 

Annuities  and  royalties 9, 994 

Patent  rights 45,394 

Steamboats,  sailing  vessels,  etc 248, 332 

Merchandise 35,494,478 

Material  and  manufactured  articles 4, 248, 483 

Manufacturers'  tools  and  implements  and  machinery 3, 895, 314 

Agricultural  tools  and  implements  and  machinery _ .  2, 644, 515 

Gold  and  silver  plate  and  plated  ware __  127, 860 

Diamonds  and  jewelry 367, 418 

Moneys  of  bankers,  brokers,  etc 3,758,946 

Credits  of  banks,  bankers,  brokers,  etc 3, 474, 848 

Moneys  of  other  than  bankers,  etc  _ 17, 742, 210 

Credits  of  other  than  bankers,  etc 26, 541, 451 

Bonds  and  stocks 4, 469, 734 

Shares  of  capital  stock  of  companies  not  of  this  State 1 , 607, 690 

Pawnbrokers'  property 

Property  of  corporations  not  enumerated _ 3, 625, 081 

Bridge  property _ 275, 374 

Property  of  saloons  and  eating  houses -  - , 

Household  and  office  furniture 11, 533, 445 

Investments  in  real  estate  and  improvements 427, 174 

Grain  of  all  kinds . 6,894,768 

Shares  of  stock  of  State  and  national  banks 10, 330, 797 

All  other  property ...  13,133,831 

Total  value  of  personal  property 183,526,987 

We  make  this  statement  to  illustrate  the  detailed  classification  provided  for  the 
purpose  of  reaching  personal  property  and  bringing  it  upon  the  rolls. 

Aggregate  equalized  assessed  value  of  lands  in  1899  in  the  several 

?Sunties__ $314,509,322 

Equalized  assessed  value  of  town  and  city  lots 373, 742, 282 

'  Assessed  value  of  personal  property -  183 , 526, 987 

Total  property  valuation,  1899... 871,778,591 

9 


130  INDUSTKIAL    COMMISSION. 

Equalized  assessments. 


Character  of  property. 

1397. 

1898. 

Personal  property 

$117,  402,  907 
308,520,973 
291,  138,  354 
78,  582,  786 
4,050,833 

SIM,  902,  459 
300,211,800 
284,  372,  381 
76,  554,  845 
2.  433,  425 

Town  and  city  lots  

Raiiroads 

Capital  stock  of  corporations  

Total 

799,  695,  853 

778,  474,  910 

The  total  assessed  valuation  of  property  in  1886  was  $793,563,498. 

It  is  a  matter  of  common  knowledge  that  the  actual  value  of  even  real  estate 
and  tangible  property  in  such  a  growing  State  as  Illinois  has  greatly  increased  since 
1886,  while  intangible  property  has  been  enormously  augmented  during  that  period. 

Manifestly,  this  general  property-tax  system  is  in  effect  a  tax  upon  real  estate 
and  tangible  property,  while  intangible  forms  of  property,  in  which  a  large  portion 
of  the  wealth  of  the  State  undoubtedly  consists,  apparently  largely  escape  direct 
taxation  under  the  methods  employed.  Where  large  masses  oftproperty  escape, 
in  consequence  other  large  classes  of  property  must  be  excessively  taxed. 

The  assessed  valuation  of  tangible  property  and  capital  stock  of  corporations 
of  the  State  except  railroads  is  only  about  one-third  of  the  assessed  valuation  of 
all  the  personal  property  of  the  State,  which  clearly  indicates  that  such  property 
is  greatly  undervalued  as  compared  with  ths  assessed  valuation  of  other  personal 
property.  It  must  be  remembered  that  this  is  a  nourishing  and  industrial  State 
full  of  large  and  growing  cities,  and,  like  other  States  of  its  class,  a  large  portion 
of  the  business  is  conducted  by  corporations. 

The  whole  system,  so  far  as  shown  by  the  reports,  clearly  illustrates  the  grave 
inconsistencies,  inequalities,  and  injustice  which  almost  inevitably  result  from 
the  ineffectual  attempt  to  raise  the  income  of  the  State  by  a  tax  assessed  at  a  uni- 
form rate  on  all  the  manifold  species  of  property  existing  to-day;  a  system  pro- 
ductive of  great  injustice  unless  substantially  all  property,  personal  and  real, 
tangible  and  intangible,  is  brought  upon  the  tax  rolls. 

The  practical  results  of  such  a  system  as  this  are  characterized  by  the  Supreme 
Court  of  the  United  States  in  the  case  of  the  Pacific  Express  Company  v.  Seibert, 
142  U.  S.,  351,  as  follows:  "This  court  has  repeatedly  laid  down  the  doctrine 
that  diversity  of  taxation,  both  in  reference  to  the  amount  imposed  and  the  vari- 
ous species  of  property  selected,  either  for  bearing  its  burdens  or  from  being 
exempt  from  them,  is  not  inconsistent  with  a  perfect  uniformity  and  equality  of 
taxation  in  the  proper  sense  of  these  terms;  and  that  a  system  that  imposes  the 
same  tax  upon  every  species  of  property,  irrespective  of  its  nature  or  condition, 
or  class,  will  be  destructive  of  the  principle  of  uniformity  and  equality  of  taxa- 
tion, and  of  a  just  adaptation  of  property  to  its  burdens." 

Some  interesting  observations  may  be  drawn  from  the  foregoing  schedule  of 
personal  property  assessed.  It  is  largely  made  up  of  assessments  of  different 


of  banks,  bankers,  brokers,  etc.,  is  not  equal  to  that  of  either  "  horses,"  "  cattle," 
or  "household  goods  "  of  the  State.  It  may  be  conclusively  assumed  that  all  of 
these  divisions  of  property  are  greatly  undervalued  in  assessment,  but  it  is  alto- 
gether probable  that  horses,  cattle,  and  hogs  and  similar  forms  of  tangible 
property  are  more  fully  valued  and  that  a  much  greater  portion  of  such  property 
is  assessed. 

Many  other  inconsistencies  are  apparent  in  this  schedule.  The  value  of  shares 
of  stock  in  State  and  national  banks  is  about  equal  to  the  value  of  horses,  while 
the  value  of  all  moneys,  credits,  bonds,  and  stocks  is  ridiculously  low,  even  allow- 
ing for  the  method  provided  by  statute  of  assessing  at  one-fifth  actual  valuation. 

The  total  assessed  value  of  personal  property  for  1899  was  $183,526,987,  about 
one-third  greater  than  that  of  1896  and  1897,  while  the  valuation  of  real  estate  in 
1899  was  $688,251,604,  more  than  three  and  two-thirds  times  that  of  personal  prop- 
erty. In  Cook  County,  including  the  city  of  Chicago,  the  following  values 
appear: 

Total  assessed  value  of — 

Personal  property,  1899 $73,611,662 

Lands.. 17,164,907 

Town  and  city  lots . -  -  285,717,467 

Total  property,  1899 376,494,036 


TAXATION    IN    ILLINOIS.  131 

Among  the  divisions  in  the  schedule  of  assessed  personal  property  for  Cook 
County  appear  the  following: 

Franchi  ses $3, 127 

Annuities  and  royalties 000 

Merchandise 24, 234, 073 

Moneys  of  bankers,  brokers,  etc 652, 426 

Credits  of  bankers,  brokers,  etc . 1, 919, 433 

Moneys  of  others  than  bankers,  brokers,  etc 4, 203, 385 

Credits  of  others  than  bankers,  brokers,  etc ^ 7, 875, 889 

Bonds  and  stocks 2, 685, 699 

Household  and  office  furniture 4, 387, 139 

Shares  of  stock  in  State  and  National  banks 5,  719, 183 

From  these  statements  it  is  difficult  to  escape  the  conclusion  that  personalty  is 
greatly  undervalued  or  escapes  taxation  as  compared  with  real  property,  and  that 
corporate  property  is  even  more  glaringly  undervalued  or  omitted  than  personal 
property  in  general. 

From  the  statement  of  Cook  County,  it  appears  that  the  personal  property  is 
only  about  one-fifth  of  the  whole  property  and  about  one-fourth  of  the  value  of 
the  real  estate  of  that  county. 

It  is  shown  that  the  general  property  tax  system  of  the  State  as  applied  to  all 
species  of  property  is  in  effect  a  tax  upon  real  estate  and  a  portion  of  the  tangible 
personal  property,  while  the  intangible  forms  of  property,  in  which  a  large  part, 
sometimes  estimated  at  one-half,  of  the  wealth  consists,  successfully  evade  taxa- 
tion of  a  direct  character. 

The  aggregate  amount  of  taxes  charged  on  the  tax  books  in  the  year  1897  was: 

State  taxes.. $5,316,764.08 

Local  taxes 41,820,326.87 


Total.... 47,137,090.95 

The  average  rate  of  taxation  in  the  several  counties,  compiled  by  the  State 
auditor  from  the  returns  received  from  the  various  county  clerks,  was,  for  1896, 
$4.20  on  the  $100,  and  in  1897,  $4.41. 

Dr.  Ely  refers  to  an  essay  of  Dr.  Simon  N.  Patten  on  the  finances  of  the  States 
and  cities,  published  in  Jena,  Germany,  in  1878,  which  deals  chiefly  with  taxa- 
tion in  Illinois,  and  which  he  says  reveals  a  state  of  things  in  that  Commonwealth 
precisely  like  that  described  in  other  States.  The  assessed  valuation  of  Illinois  in 
1875  was  as  follows: 

Cattle  $80, 000, 000 

Railroads 60,000,000 

Real  estate 780,000,000 

All  other  property 165, 000, 000 

Total 1,085,000,000 

Real  estate  and  railroads  paid  78  per  cent  of  the  taxes,  cattle  7  per  cent,  leaving 
only  15  per  cent  for  all  other  property,  which  is,  of  course,  absurd. 

Attention  is  called  to  the  fact  that  assessors  and  collectors  of  taxes  are  elected 
for  1  year  only,  by  a  system  of  rotation,  and  that  they  are  devoid  of  that  experi- 
ence which  is  an  indispensable  condition  of  a  faithful  performance  of  duty.  The 
fact  that  one  has  enjoyed  office  for  a  year  is  regarded  as  a  good  reason  why  some 
one  else  should  have  a  chance.  Voters  good-naturedly  consider  a  special  misfor- 
tune which  has  befallen  one  of  their  number,  or  any  special  need,  as  a  sufficient 
reason  why  he  should  be  elected,  and  from  motives  of  pity  weak  and  inefficient 
men  are  elected.  This  appears,  as  far  as  the  author's  observation  has  extended, 
to  be  common  everywhere  in  the  United  States. 

Dr.  Patten  draws  the  justifiable  conclusion  that  the  failure  of  the  system  of  tax- 
ation in  Illinois  is  accounted  for  by  the  nature  of  the  system,  itself,  and  that  there 
must  be  a  change  to  produce  any  considerable  improvement.  The  practice  of 
confining  one's  self  to  the  one  direct  tax  on  the  assessed  value  of  property  must, 
he  thinks,  be  abandoned. 

The  statements  of  valuation  and  taxation  we  have  given  from  the  reports  of 
public  officials  indicate  that  there  is  little  or  no  improvement  in  the  taxing  system 
in  Illinois  since  the  examination  by  Dr.  Patten. 


132  INDUSTRIAL    COMMISSION. 

ILLINOIS  TAX  COMMISSION. 

In  1885  a  tax  commission  was  appointed  by  Governor  Oglesby,  which  made  a 
very  careful  examination  of  the  revenue  laws  of  Illinois,  and  in  1886  filed  its 
report  recommending  some  radical  changes.  The  report  was  written  by  Milton 
Hay,  an  eminent  lawyer  of  that  State,  and  is  entitled  to  high  rank  in  the  literature 
of  the  taxation  of  American  States. 

S&ne  of  the  defects  set  forth  and  changes  recommended  are  of  especial  interest 
to  all  interested  in  the  subject  of  State  taxation: 

"  First.  The  gross  inequality  in  the  assessments  of  different  pieces  of  property 
of  the  same  kind,  owned  by  different  individuals  in  the  same  community,  and  of 
different  kinds  of  property  regardless  of  ownership;  as,  for  instance,  real  estate 
and  personalty,  a  large  proportion  of  the  personalty  escaping  taxation." 

It  is  alleged  that  realty  of  different  individuals  is  assessed  from  two-thirds  or 
even  the  whole  of  its  actual  value  down  to  one  twenty -fifth  of  its  value,  the 
owner  of  one  piece  paying  5  or  6  per  cent  of  the  whole  capital  invested,  while 
the  owner  of  another  pays  one-fourth  or  one-fifth  of  1  per  cent,  distinctions  too 
invidious  to  be  meekly  borne. 

Equally  glaring  and  unjust  discriminations  are  shown  as  between  personal  prop- 
erty and  realty  in  favor  of  the  former,  amounting  in  some  species  of  that  class  to 
almost  total  escape  from  taxation. 

The  system  of  equalization  dealing  with  the  aggregate  assessment  of  different 
classes  of  property,  raising  or  lowering  each  class  in  equal  proportion  by  a  fixed 
and  arbitrary  percentage,  further  discriminates  against  the  higher  assessments 
and  in  favor  of  the  lower. 

The  liability  to  inequitable  assessments  is  further  increased  by  a  system  of 
undervalution  or  low-rate  assessments.  Inequalities  that  would  be  so  suggestive 
as  to  be  almost  self -corrective  as  between  full  values  escape  change  when  frac- 
tional value  obtains,  and  the  low  rating  virtually  acts  as  an  estoppel  of  complaint 
on  the  part  of  the  property  owner,  though  rated  higher  than  his  neighbor. 

It  is  said  that  no  remedy  for  this  improper  valuation  seems  possible  unless  some 
method  be  devised  for  divorcing  the  collection  of  State  and  local  revenues. 

''Without  such  a  divorcement,  no  provisions  of  the  law,  however  stringent, 
and  no  penalties  which  would  be  possible  or  desirable  as  sanctions  of  the  law, 
would  produce  the  desired  result." 

Hence  the  revenue  system  constructed  and  proposed  by  the  commission  is  based 
upon  the  separation  of  State  and  local  taxes. 

Another  defect  pointed  out  is  in  the  methods  employed  under  the  present  system 
in  the  assessment  of  corporate  and  intangible  forms  of  property. 

It  is  suggested  in  substance  that  there  are  now  vast  aggregations  of  capital  of 
such  a  nature  that  their  value  can  hardly  be  measured  by  methods  applicable  to 
other  kinds  of  property.  That  corporate  property  can  not  be  estimated  in  like 
manner  as  farm  acres,  cattle,  or  a  stock  of  goods.  That  the  separation  in  such 
cases  of  tangible  property  from  intangible,  and  the  assessment  in  parts  by  different 
assessors  or  boards,  can  not  be  rationally  or  successfully  made.  ' '  The  two  elements 
of  value  belong  together.  If  torn  apart  the  township  assessor  deals  with  a  dead 
body  and  the  State  board  with  a  departed  spirit." 

Railroad,  telegraph,  telephone,  express,  and  insurance  companies  should  be 
treated  for  taxation  as  units,  and  estimated  or  valued  by  some  method  consistent 
with  their  nature  and  the  extent  and  complexity  of  their  affairs. 

Another  defect  in  the  existing  system  is  the  want  of  a  competent  body  having 
a  general  oversight  of  the  entire  business  of  assessment  and  the  collection  of 
$30,000,000  of  annual  revenue  of  the  State. 

The  commission  recommends  the  abolition  of  the  office  of  township  assessor  and 
the  substitution  of  county  assessors,  elected  for  4  years  and  to  be  ineligible  for 
reelection,  with  sufficient' pay  to  command  the  services  of  competent  and  reliable 
men,  who  shall  be  provided  with  offices  at  county  seats  and  accessible  there 
throughout  the  year,  and  who,  with  deputies  throughout  the  county  appointed  by 
them,  shall  assess  the  property  of  their  respective  counties. 

Also,  that  better  instrumentalities  for  ascertaining  the  value  of  property  be  pro- 
vided, and  to  that  end  that  each  comity  be  divided  into  small  assessment  districts, 
and  detailed  maps,  plats,  and  assessments  be  kept  open  for  inspection  by  taxpayers, 
so  that  they  can  see  their  own  and  other  assessments. 

That  adequate  means  be  provided  for  the  correction  of  any  injustice  or  inequal- 
ity that  may  arise  in  assessment,  and  that  a  competent  board  of  review  be 
provided  in  each  county. 

The  commission  adheres  to  the  existing  system  of  assessment  of  corporations 
local  in  character,  such  as  manufacturing,  agricultural,  or  publishing  companies, 


TAXATION    IN    ILLINOIS.  133 

by  local  assessors,  on  the  same  basis  and  in  the  same  manner  that  individuals  are 
taxed,  and  also  recommends  that  the  capital-stock  tax  be  limited  to  corporations 
of  a  quasi-public  character,  and  that  of  such  corporations  those  local  in  char- 
acter, such  as  street  railways,  gas  companies,  etc.,  be  assessed  by  the  county 
assessors  instead  of  by  a  State  board. 

In  regard  to  the  assessment  of  personal  property  of  individuals,  the  commission- 
ers recommend  that  schedules  b0  required  and  a  substantial  penalty  be  imposed 
for  false  schedules,  but  that  the  requirement  of  the  oath  to  such  schedules  be 
abandoned.  They  believe  such  requirement  to  be  "  debauching  to  the  conscience 
and  subversive  of  the  public  morals." 

To  railroad  property,  they  say,  the  ordinary  rules  of  valuation  have  little  appli- 
cation, the  true  criterion  of  value  and  the  best  basis  of  taxation  being  found  in 
their  receipts. 

After  a  careful  study  of  railroad  statistics  and  much  attention  to  the  subject 
of  the  average  proportion  between  gross  receipts,  expenditures,  and  the  capitalized 
value  of  railroads,  they  deduce  the  conclusion  that  a  rate  of  taxation  equal  to  the 
average  rate  throughout  the  State  of  Illinois,  imposed  upon  five  times  the  amount 
of  the  gross  receipts  of  a  railroad  in  that  State  or  upon  the  Illinois  portion  of  the 
gross  receipts  of  an  interstate  road,  would  be  just  and  more  flexible  than  an  arbi- 
trary percentage,  provided  that  such  rate  of  taxation  should  not  exceed  5  per  cent 
of  such  gross  receipts. 

It  is  proposed  to  determine  the  average  rate  of  taxation  in  the  State  by  adding 
together  all  the  taxes  levied  in  the  State  and  dividing  the  amount  of  the  tax  by 
the  total  assessed  value  of  all  the  property  in  the  State. 

It  is  suggested  that  this  rule  would  be  fair  and  just  if  all  the  property  in  the 
State  were  assessed  at  its  full  cash  value,  as  the  law  requires,  but  that  if  in  any 
portion  the  assessment  should  fall  below  the  full  value  (a  result  quite  possible  in 
Illinois)  the  average  rate  would  be  increased  in  proportion,  and  railroads  would  be 
held  to  the  same  rate  on  full  valuation  that  other  property  pays  on  partial  valuation; 
to  guard  against  which  injustice  the  limitation  of  5  per  cent  of  gross  receipts  is 
proposed. 

In  reviewing  this  proposed  method  for  the  taxation  of  railroads,  the  suggestion 
occurs  that  in  all  cases  of  divorcement  of  incompatible  or  irreconcilable  elements 
or  systems  it  is  always  advisable  to  make  the  separation  complete  and  avoid  any 
lingering  conflict  or  misery. 

The  proposition  for  the  taxation  of  other  quasi-public  corporations  is  as  follows: 

Telegraph,  82  on  each  instrument. 

Express,  24  per  cent  of  the  gross  receipts. 

Public  warehousemen,  one  third  of  1  cent  for  every  bushel  of  capacity  of  each 
elevator  or  granary. 

The  commissioners  also  recommend  certain  limitations  upon  the  various  classes 
of  taxes  for  the  protection  of  "  taxpayers  from  the  rapacity  of  unprincipled  tax 
consumers." 

They  finally  recommend  the  appointment  by  the  governor  of  a  State  board  of 
tax  commissioners  for  general  supervision  of  the  taxation  system  of  the  State. 

It  is  apparent  that  this  commission  was  more  or  less  influenced  and  felt  some- 
what handicapped  by  the  desirability  of  retaining,  so  far  as  practicable,  the 
machinery  of  existing  laws  for  taxation  so  as  to  avoid  friction  in  bringing  about 
changes,  and  to  propose  only  such  changes  as  would  not  involve  changes  in  the 
organic  law  of  the  State. 

Unfortunately  for  the  State,  the  legislature  as  yet  has  not  adopted  the  changes 
recommended  by  the  commission,  and  any  substantial  change  in  the  existing  sys- 
tem appears  to  be  difficult  to  bring  about  because  of  political  and  sectional  consid- 
erations, although  public  opinion  seems  to  be  favorably  affected  by  the  work  and 
agitation  of  such  men  as  composed  this  commission. 


WISCONSIN. 

The  primary  method  which  obtains  in  this  State  for  raising  the  greater  portion 
of  public  revenue  is  the  general  property  tax  upon  assessed  valuations;  the  greater 
portion  of  the  property  in  the  State,  real  and  personal,  including  general  corporate 
property,  being  subject  to  such  direct  tax  through  local  assessment. 

Few  important  changes  or  modifications  in  the  general  property-tax  system 
have  been  made.  There  has  been  no  systematic  effort  to  make  the  system  "worse" 
by  "  improving  it,"  as  Professor  Ely  might  say. 

The  other  distinctive  method  of  taxation  is  a  system  of  license  fees,  so  called, 
in  lieu  of  taxes  by  the  valuation  method.  The  interests  coming  wilJhin  this  method 
are  chiefly  corporations  of  the  class  commonly  designated  as  public  service  or 
quasi-public  corporations,  and  include  railroad,  street-railway,  telegraph,  tele- 
phone, electric  light  and  power,  sleeping-car,  boom,  trust,  and  guaranty  com- 
panies, and  life,  fire,  and  navigation  insurance  corporations,  which  will  be  con- 
sidered separately. 

Certain  constitutional  restrictions  are  imposed  upon  the  legislature  with  refer- 
ence to  the  subject  of  taxation,  the  principal  ones  being  that  it  is  prohibited  from 
enacting  any  but  general  laws  for  the  assessment  or  collection  of  taxes,  and  that 
such  laws  shall  be  uniform  in  their  operation  throughout  the  State;  and  that 
"the  rule  of  taxation  shall  be  uniform,  and  taxes  shall  be  levied  upon  such 
property  as  the  legislature  shall  prescribe." 

Under  these  constitutional  limitations  it  has  been  held  that  the  legislature  can 
not  authorize  the  valuation  for  taxation  of  one  class  of  property  on  a  different 
basis  or  ratio  to  true  valuation  from  that  applied  to  other  property  in  the  same 
taxing  district.  But  it  has  also  been  held  that  the  constitutional  requirement  of 
uniformity  is  not  violated  by  the  taxation  of  a  particular  class  or  kind  of  property 
by  a  different  method  from  that  employed  in  taxing  other  property,  provided  the 
law  is  uniform  in  its  operation  throughout  the  State. 

Thus  the  existing  method  for  the  taxation  of  the  property  and  franchises  of 
railroads  and  other  corporations,  by  a  fixed  percentage  of  gross  earnings  paid 
wholly  to  the  State  in  lieu  of  all  other  taxes,  is  constitutional. 

GENERAL  PROPERTY  TAX. 

Under  the  general  property-tax  system,  State  taxes,  except  those  raised  by 
other  methods,  hereinafter  set  forth*  are  levied  by  legislative  enactments,  and 
apportioned  to  the  several  counties  according  to  the  value  of  taxable  property 
therein,  as  fixed  by  the  State  board  of  equalization;  and  these  taxes,  together  with 
taxes  for  county,  township,  city,  and  village  purposes,  are  based  upon  assessments 
on  real  and  personal  property,  in  the  several  local  taxing  districts,  by  local  assessors 
who  are  elected  except  when  otherwise  provided  in  special  city  or  village  char- 
ters, the  township  or  ward  constituting,  as  a  rule,  a  single  assessment  district.  In 
the  general  property-tax  system,  here  as  elsewhere,  the  assessment  is  the  founda- 
tion for  the  entire  structure. 

PROPERTY  LIABLE  TO  ASSESSMENT. 

All  property  in  the  State  not  specially  exempt  by  statute  is  liable  to  assess- 
ment for  taxation,  real  and  personal  property  being  for  that  purpose  specifically 
and  comprehensively  defined,  the  latter  including  all  debts  due  or  to  become  due 
from  solvent  debtors,  however  evidenced  or  secured,  and  "all  goods,  wares,  mer- 
chandise, chattels,  or  effects  of  any  nature  or  description  having  any  real  or 
marketable  value." 

There  are  the  usual  exemptions  of  public  property,  the  taxation  of  which  would 
serve  no  useful  purpose;  exemptions  in  aid  of  religious,  benevolent,  industrial, 
and  other  institutions  deemed  to  be  beneficial  to  society;  special  exemptions 
designed  to  promote  certain  industries,  which  include  property  devoted  to  the 
manufacture  of  beet  sugar  for  a  limited  period,  property  invested  in  the  manu- 
facture of  oxide  of  zinc  or  metallic  zinc  from  native  ores,  for  limited  periods, 
134 


TAXATION    IN    WISCONSIN.  135 

investments  in  mutual  savings  funds  or  building  and  loan  associations,  etc.; 
exemptions  of  personal  effects  regarded  as  necessities,  and  exemptions  of  property 
taxed  by  some  method  other  than  directly  by  property  valuation. 

ASSESSMENT. 

In  general,  real  and  personal  property  are  taxed  separately  in  the  usual  manner. 

For  the  purposes  of  local  taxation  a  corporation  is  deemed  to  be  a  resident  in 
the  district  in  which  it  has  its  office  or  place  of  business. 

Shares  of  stock  in  banking  associations  or  corporations  organized  under  State 
or  Federal  laws  are  assessed  to  the  owners  at  local  rates  m  the  district  where 
the  bank  is  located. 

To  enable  the  assessors  to  assess  bank  stock  to  the  proper  persons,  bank  officers 
are  required  to  furnish  them  with  a  statement  showing  name  and  residence  of 
each  shareholder  and  the  amount  of  stock  held  by  him. 

As  a  rule,  assessments  of  real  and  personal  property  are  made  by  estimate  of  the 
local  assessors,  some  general  statutory  provisions  being  made  for  the  assistance 
of  the  assessors. 

It  is  provided  that  "  the  articles  of  personal  property  shall  as  far  as  practicable  be 
valued  by  the  assessor  upon  actual  view  at  their  true  cash  value."  The  assessor 
is  not  confined  to  such  property  as  he  may  discover,  but  if  he  has  reason  to 
believe  that  any  taxable  has  other  property  liable  to  taxation,  he  may  increase 
the  assessment  as  in  his  judgment  appears  to  be  just  and  equitable.  He  has 
authority  to  examine  the  property  owner  under  oath  as  to  the  items  and  value  of 
all  his  personal  property  liable  to  taxation,  other  than  money,  notes,  bonds, 
mortgages,  and  other  securities. 

In  case  of  his  refusal  to  testify,  or  in  case  the  assessor  should  desire  further  evi- 
dence, sworn  evidence  from  others  having  knowledge  of  the  matter  may  be  taken. 

To  enable  the  assessor  to  determine  the  amount  of  money,  notes,  mortgages,  or 
other  credits  or  securities  for  which  any  person  should  be  assessed,  and  the  amount 
of  indebtedness  to  be  deducted  therefrom,  he  is  required  to  make  a  statement 
under  oath  of  the  average  amount  of  such  money,  etc.,  and  the  average  amount 
of  indebtedness  which  he  may  be  entitled  to  deduct  for  each  month  of  the  year 
ending  May  1,  and  the  net  average  thus  ascertained  is  assessable  for  taxation. 

No  penalties  are  provided  for  failure  or  refusal  to  perform  these  duties  except 
that  the  assessor  is  liable  to  a  fine  if  he  accepts  the  statements  as  to  moneys, 
credits,  etc. ,  without  its  being  signed  and  sworn  to,  and  a  property  owner  who  inten- 
tionally makes  a  false  statement  is  liable  to  a  forfeit  of  $10  for  each  $100  worth  of 
taxable  property  thereby  withheld  from  the  knowledge  of  the  assessor. 

Valuation  of  real  and  personal  property,  1898. 


Class  of  property. 

Valuation 
by  local 

assessors. 

Valuation  by 
State  board. 

Total  assessed  valuation  of  real  estate  

$519,  990,  522 

$482,  283,  031 

Total  assessed  valuation  of  personal  property  

108,  513,  489 

117,  716,  969 

Total 

628  504  Oil 

600  000  000 

Total  town,  city,  village,  and  county  taxes  levied  for  1897 $14,818,899.23 

State  taxes  apportioned  to  counties 2, 241, 427. 55 

Total 17,060,326.78 

Abstract  of  assessment  rolls,  1898. 
Personal  property: 
Tangible — 

Horses. :.. $10,575,343 

Neat  cattle 11, 422, 994 

Mules  and  asses 45, 600 

Sheep  and  lambs . 756,985 

Swine 1,406,377 

Grain,  etc 283,168 

Leaf  tobacco 68, 197 

Private  libraries 3 1 , 029 

Watches 371,721 

Wagons,  etc 3, 117, 814 

Furniture 166,784 


136 


INDUSTRIAL    COMMISSION. 


Personal  property — Continued. 
Tangible — Continued . 

Pianos,  organs,  etc _ $1, 974, 169 

Saw  logs 2,873,944 

Timber 419,957 

Railroad  ties 5, 455 

Telegraph  poles 15, 085 

*        Steamboats 531,076 

Merchants'  and  manufacturers'  stock 32, 098, 269 

Other  tangible  property  ...  10, 562, 221 

Total  tangible 76,726,188 

Intangible — 

Money.... 7,163,444 

Bonds  and  mortgages 13, 514, 227 

Bank  stock 7,588,890 

Other  intangible  personal  property 3, 520, 740 

Total  intangible •....  31,787,301 

Total  personal  property 108, 513, 489 

Real  estate: 

City  and  village  lots 261,397,460 

Lands 258,593,062 

Total  real  estate 519,990,522 

Grand  total * 628,504,011 

Statement  of  assessed  valuations  in  Wisconsin  from  1854  to  1898. 


Year. 


Assessed  val- 
uation of  all  real 
estate. 


Assessed  val- 
uation of  per- 
sonal property. 


Aggregate  as- 
sessed valuation 
of  all  property. 


Equalized 

valuation  of  all 

property. 


1854 
1855 
1856 
1857 
1858 
1859 
1860 
1861 
1862 
1863 
1864 
1865 
1866 
1867 


1870 
1871 
1872 
1873 
1874 
1875 
1876 
1877 
1878 
1879 
1880 
1881 
1882 
1883 
1884 
1885 
1886 
1887 
1888 
1889 
1890 
1891 
1892 
1893 
1894 
1895 
1897 


$19, 821, 969. 00 
34,668,597.00 
48, 692, 747. 00 
63,661,609.00 

138,  382, 105. 94 

138. 929, 806. 96 
142, 763,  784. 48 
127, 647, 554. 74 
128,527,156.19 
121, 533, 782. 70 
121,101,304.42 

121. 455, 306. 97 
125, 363, 097. 18 
160, 847, 636. 76 
146,091,701.00 
243, 494, 454. 00 
247, 546,  705. 00 
252, 745,  793. 00 
256,796,026.00 
260, 006,  309. 00 
264, 690,  375. 00 
259, 596, 729. 00 
273, 249, 295. 00 
274,417,873.00 
359, 263, 374. 32 
318,175,245.00 
335, 932, 572. 00 
337, 124, 810. 00 
346,252,895.00 
364,319,935.00 
378, 853, 894. 00 
378, 948, 279. 00 
399,831,764.00 
420, 508,  397. 00 
435,202,277.00 
443, 948, 601. 00 
467,527,974.00 
483, 884, 391. 00 
498, 639, 922. 00 
606, 444, 430. 00 
516, 224, 315. 00 
518, 525, 693. 48 
519, 669, 155. 00 
519, 990,  522. 00 


$2, 796, 741. 00 

4, 172, 164. 00 

5, 524, 455. 00 

6,256,411.00 

23, 525, 533. 76 

13, 607, 893. 04 

27, 506, 761. 56 

24, 092, 610. 44 

24,331,861.55 

25, 481, 640. 04 

31,838,025.10 

32,811,313.33 

36, 260, 857. 01 

50, 824, 841. 71 

49, 020, 474. 00 

82, 737, 142. 00 

79,218,533.00 

76, 757, 910. 00 

81,201,828.00 

80, 613, 943. 00 

81, 786, 989. 00 

77,827,663.00 

79, 566, 340. 00 

77,362,481.00 

96, 077, 208. 00 

88, 127, 940. 00 

89, 747, 571. 00 

92, 775, 635. 00 

100, 507, 690. 00 

107, 128, 573. 00 

109, 096, 472. 00 

111,  153, 504. 00 

104, 713, 164. 00 

107,829,316.00 

103, 164, 010. 00 

113,022,341.00 

112, 311, 568. 00 

107, 120, 453. 00 

103, 808, 297. 00 

118, 262, 683. 00 

116, 474, 813. 00 

114, 821, 913. 88 

110, 066,  353. 00 

108, 513, 489. 00 


$22, 618, 710. 00 
38, 840,  761. 00 
54, 217, 202. 00 
69, 918, 020. 00 
161,907,639.70 
152, 537,  700. 00 
170, 270, 546. 04 
151, 740, 165. 18 
152, 859;  017. 74 
147,015,322.74 
152, 939, 329. 52 
154, 266, 620. 30 
161,623,954.19 
211,672,478.47 
195, 112, 175. 00 
326, 231, 596. 00 
326,  76-%  238. 00 
329, 503, 703. 00 
337, 997, 854. 00 
340,  620, 252. 00 
346, 476, 464. 00 
337,424,392.00 
352, 815, 635. 00 
351,780,354.00 
455,  340, 582.  32 
406, 303, 185. 00 
425,  680, 143. 00 
429, 900, 445. 00 
446,  770, 585. 00 
471,448,508.00 
487, 950, 036. 00 
490, 101,  7*3. 00 
504, 544, 928. 00 
528,  337, 713. 00 
538,  366, 287. 00 
566, 970, 942. 00 
579, 839, 542.  00 
591. 004,  SI  I.  00 
602, 448, 219. 00 
624,707,113.00 
632, 680, 710. 00 
633, 347, 607. 36 
629,  735, 508. 00 
628, 504, Oil.  00 


$64, 285, 714. 00 
87, 500, 000. 00 
150,000,000.00 
150, 000, 000. 00 
175, 000, 000. 00 
168, 620, 233. 70 
184, 062, 536. 00 
180, 984, 454. 38 
182, 507, 222. 13 
153,071,773.42 
152, 652, 752. 00 
157, 416, 297. 97 
162, 320, 153. 51 
196,851,160.97 
244, 440, 774. 00 
244, 440, 774. 00 
455, 900, 800.  00 
455, 900, 800. 00 
390,454,875.00 
390,454,875.00 
421,285,359.00 
421,285,359.00 
423, 596, 290. 00 
423,596,290.00 
413, 102, 796. 00 
438,971,801.00 
445, 582, 720. 00 
447, 804,  968. 00 
456,325,171.00 
459, 540, 157. 00 
476, 396,  354. 00 
488, 139, 614. 00 
581,264,749.00 
573, 229, 855. 00 
577, 092, 815. 00 
592,890,719.00 
623, 859, 417. 00 
654,000,000.00 
654, 000, 000. 00 
654, 000, 000. 00 
603, 473, 526. 50 
600,000,000.00 
600, 000, 000. 00 
600, 000, 000. 00 


f 

TAXATION    IN    WISCONS 

An  analysis  of  this  statement  will  disclose  the  character  of-  -tHe  work  of  assess- 
ment and  equalization  of  property  in  this  State  coming  within  the  general  property- 
tax  laws.  The  exceedingly  low  valuation  of  all  real  and  personal  property  in 
this  large  and  wealthy  State,  being  but  $600,000,000,  and  the  ratio  of  real  to  per- 
sonal property  reveal  at  a  glance  the  inefficiency  and  inequality  of  assessment. 
A  Wisconsin  assessment  roll  has  been  described  as  a  "  patchwork  of  arbitrary 
undervaluation. " 

As  illustrations  of  the  gross  inequalities  in  the  assessment  of  personalty,  it  is 
stated  by  the  tax  commission  of  1898  that  13  counties  in  the  State  failed  in  1897  to 
make  any  return  under  the  head  of  average  amount  of  moneys  in  possession  and 
on  deposit,  while  the  official  reports  show  that  there  was  on  deposit  in  the  banks  in 
those  counties  the  sum  of  $5,663,861.99. 

The  total  amount  assessed  under  this  head  in  the  State  that  year  was  $7,163,444, 
while  the  reports  of  the  national,  State,  and  private  banks  showed  the  amounts  of 
-deposits  to  have  been  $74,678,795.55. 

There  were  21  counties  that  did  not  return  any  notes,  bonds,  or  mortgages. 

LIQUOR-LICENSE  FEES. 

Separate  provision  is  made  for  the  granting  of  licenses  for  the  sale  of  intoxi- 
cating liquors  by  town  and  village  boards  and  by  the  common  councils  of  cities. 
The  fee  which  may  be  charged  is  in  towns  ordinarily  $100,  and  in  villages  and 
cities  $200  per  year,  which  amounts  may  be  increased  to  not  more  than  $400  in 
towns  and  not  more  than  $500  in  cities  and  villages  by  vote  of  the  electors,  under 
certain  conditions  and  restrictions. 

The  funds  derived  from  such  license  fees  are  directed  to  be  used  primarily  for 
the  support  of  the  poor,  but  in  practical  working  the  moneys  so  derived  virtually 
go  into  the  general  fund  of  the  town,  city,  or  village  in  which  the  license  is 
granted.  The  following  is  an  incomplete  statement  of  the  amounts  so  raised: 

Amount  collected  in  546  towns  and  villages  in  1897 $584, 748. 70 

Amount  collected  in  100  cities  in  1897. 979, 162. 02 


Total 1,563,910.72 

POLL  TAX. 

Another  source  of  revenue  is  a  poll  tax  upon  male  residents  between  21  and  50 
years  of  age,  with  certain  exemptions,  amounting  to  $1.50  per  poll  each  year. 
This  law  is  not  enforced  in  all  parts  of  the  State,  and  its  repeal  is  advocated.  In 
1897,  out  of  1,137  towns  and  villages  in  the  State,  only  493  made  any  attempt  to 
collect  poll  taxes,  and  the  total  amount  they  collected  was  $95,871.75.  Of  the  111 
cities  only  39  reported  any  poll  tax  raised  in  1897,  and  the  total  amount  obtained 
was  the  sum  of  $12,578.37. 

In  that  year  there  was  not  one  county  in  which  all  the  taxpaying  districts  raised 
a  poll  tax,  and  there  were  8  counties  in  which  there  was  not  a  dollar  of  such  tax 
collected. 

DEFECTS  IN  THE  PROPERTY-VALUATION  SYSTEM. 

Some  valuable  lessons  may  be  drawn  as  to  the  practical  working  of  the  general 
property -tax  system  by  reference  to  defects  in  that  system  in  operation  in  Wis- 
consin, pointed  out  by  the  Wisconsin  tax  commission  in  its  able  and  valuable 
report  of  1898,  from  which  much  of  the  information  herein  contained  is  derived. 

Under  that  system  the  amount  of  tax  which  each  person  is  to  pay  is  apportioned 
upon  the  basis  of  the  taxable  property  which  he  owns.  The  assessment  is  at  the 
foundation  of  this  taxing  system.  It  is  shown  that  property  under  local  assess- 
ment is  valued  upon  widely  different  bases,  but  that  vast  amounts  are  annually 
left  off  the  assessment  rolls  entirely. 

For  the  purpose  of  testing  the  efficacy  of  assessment  laws  in  this  regard,  com- 
parison is  made  between  the  United  States  census  reports  of  1890  and  the  State 
census  of  1895. 

Total  true  valuation  of  all  property,  1890 $1 , 833, 308, 523 

From  which  was  deducted  value  of  railways,   telegraphs,  tele- 
phones, etc 333,308,523 

Leaving  estimated  true  value  of  taxable  property 1 , 500, 000, 000 

£>howing  the  discrepancy  between  the  true  valuation  as  thereby  stated  and  the 
assessed  valuation  of  property  assessed  locally  in  1890  to  be  substantially 
$1,000,000,000. 


138  INDUSTRIAL    COMMISSION. 

It  is  stated  by  the  commission  that  on  account  of  this  unequal  valuation  and 
omission  of  property  from  the  assessment  rolls,  statistics  and  daily  experience 
show  that  the  people  least  able  to  bear  the  burden  of  taxes  are  often  those  upon 
whose  shoulders  these  burdens  are  laid  most  heavily.  ''Because  the  possessions 
of  the  poor  man  are  few  and  tangible  and  in  plain  sight  they  are  all  carried  into 
the  assessment  roll,  while  the  stocks,  bonds,  mortgages,  and  other  valuable  securi- 
ties of  the  wealthy  man  for  the  most  part  escape  the  assessor's  notice." 

^Statistics  are  produced  by  the  commission  showing  that  about  three-fourths  of 
the  live  stock  owned  by  the  farmers  is  assessed  upon  the  rolls  at  about  60  percent  of 
the  total  true  value  as  fixed  by  the  State  census,  and  comparison  is  made  between 
that  class  of  property  and  bank  deposits,  the  amount  of  individual  deposits  at  a 
given  date  being  shown  as  follows: 

In  the  National  banks $26,633,453.86 

In  the  State  banks _ _  _ 34, 583, 141. 45 

In  private  banks '_'_      4, 537'  542. 64 

Total 55,754,137.95 

According  to  the  report  of  the  secretary  of  state,  the  totaltassessed  value  of 
money  in  possession  and  on  deposit  on  the  same  date  was  only  $3,032,103,  or  a 
little  over  5  per  cent  of  the  true  value  of  deposits  alone. 

It  is  estimated  that  the  amount  of  personal  property  in  Wisconsin  is  fully  equal 
in  value  to  real  estate,  yet  the  amount  assessed  is  only  17  per  cent,  or  about  one- 
sixth,  of  the  total  property  assessed  and  has  been  steadily  decreasing  for  several 
years.  Aside  from  the  vast  amount  of  intangible  property  omitted  from  the 
rolls,  it  is  stated  that  there  are  millions  of  dollars  worth  of  tangible,  visible 
property  which  at  present  escapes  taxation  through  the  imperfection  and  loose- 
ness of  the  laws.  The  vicious  practice  of  undervaluation  and  unequal  valua- 
tion by  local  assessors  is  clearly  pointed  out  and  severely  condemned  by  this 
commission: 

' '  The  habit  of  undervaluation  is  one  of  such  long  standing  that  in  most  assess- 
ment districts  sets  or  series  of  arbitrary  valuations  for  assessment  purposes  having 
become  established,  those  originating  in  slight  departures  from  true  values 
have  been  changed  from  time  to  time,  according  to  the  notions  of  successive 
assessors,  previous  assessments  being  taken  as  a  guide  or  standard  rather  than 
actual  values,  until  the  whole  becomes  but  a  mass  of  arbitrary  figures.  Assess- 
ment valuations  have  thus  come  to  be  a  fact,  and  are  commonly  considered  and 
treated  as  something  apart  from  and  unrelated  to  actual  values. 

"  The  feeling  on  the  part  of  the  assessor  that  he  is  bound  by  no  definite  rule  or 
standard  begets  indifference  and  carelessness,  gives  bias  or  prejudice  free  play, 
and  with  the  easy-going  or  intentionally  dishonest  official  affords  both  room 
and  cover  for  favoritism  and  partiality.'  The  members  of  the  tax  commission 
have  found  frequent  instances  of  an  almost  open  and  avowed  practice  of  favor- 
ing particular  interests  and 'industries  or  classes  of  property  by  low  assessments, 
such  discrimination  being  justified  upon  grounds  of  supposed  public  policy.  Of 
course  there  are  localities  where  the  assessments  have  for  years  been  made  or 
supervised  by  men  of  character  and  ability,  and  in  these  no  glaring  inequalities 
exist.  But  in  very  many  instances,  perhaps  in  the  majority  of  cases,  the  assess- 
ment has  come  to  be  hardly  more  than  a  farce.  But  this  so-called  assessment 
roll,  with  a  piece  of  perjury  attached  in  the  form  of  the  assessor's  oath,  is 
solemnly  accepted  as  the  basis  on  which  citizens  are  asked,  and  virtually  forced, 
to  make  their  contribution  to  the  heavy  and  constantly  increasing  burden  of 
taxation.  The  perjury  documents  are  also  supposed  to  form  the  basis  of  the 
county  equalization  and  ultimately  the  basis  for  the  apportionment  of  State 
taxes.  They  are,  in  fact,  in  most  instances  discredited  and  almost  wholly  dis- 
regarded. The  legislature  itself  recognizes  their  unreliability  by  directing  the 
abstracts  of  assessments  to  be  supplemented  by  statistics  of  population  and  such 
other  loose  data  as  may  be  gathered  to  aid  boards  of  equalization  to  guess  at  the 
value  of  taxable  property  in  the  various  districts. 

"  The  county  assessment  becomes  a  disgraceful  struggle  between  the  members 
of  the  county  board,  each  striving  to  help  his  own  district  at  the  expense  of  the 
others.  The  members  of  the  county  board  from  the  towns  are  often  arrayed 
against  those  from  the  city  and  whichever  side  is  in  the  minority  immediately 
proceeds  to  make  more  towns  or  wards,  as  the  case  may  be,  in  order  to  get  more 
votes." 

"  Nor  does  the  evil  end  with  the  county  assessment.  The  arbitrary  and  unre- 
liable local  assessments,  supplemented  by  the  equally  unreliable  county  assessment, 
constitute  the  principal  data  upon  which  the  State  board  of  equalization  must 
make  its  assessment." 


TAXATION    IN    WISCONSIN.  139 

Dr.  R.  T.  Ely,  in  his  work  on  Taxation  in  American  States  and  Cities,  in  dis- 
cussing taxation  in  Wisconsin,  refers  to  a  statement  made  to  him  by  a  gentleman 
of  prominence  and  an  officeholder  in  that  State,  as  follows:  "You  see  in  me  a 
monument  of  the  iniquity  of  our  present  system  of  taxation.  When  I  was  a  poor 
and  struggling  young  man  with  $500  or  $600  worth  of  personalty,  I  paid  on  all 
that  I  had,  but  now  that  I  really  have  something  I  keep  still  and  pay  taxes  on 
only  a  part  of  my  property.  Indeed,  when  I  think  about  taxation,  I  feel  like 
turning  anarchist  and  blowing  things  up  with  dynamite." 

For  the  purpose  of  providing  a  remedy  that  would  reach  the  "  root  of  the  evil" 
and  prevent  undervaluation  of  property,  the  tax  commission  of  1898  recom- 
mended radical  changes  in  the  laws  of  property  assessment  and  a  rigid  listing  of 
personal  property  by  owners. 

TAXATION  OF  NOTES,  BONDS,  MORTGAGES,  AND  OTHER  SECURITIES. 

This  subject  of  commanding  interest  to  the  people  of  all  States  where  such 
securities  are  locally  taxed  under  the  valuation  system  is  ably  discussed  by  the 
Wisconsin  tax  commission  as  to  its  effect  in  that  State.  The  omission  of  this 
kind  of  property  from  assessment  is  said  to  be  the  most  noticeable  of  all  defects 
in  the  administration  of  the  tax  laws  in  Wisconsin,  and  it  is  shown  that  such 
property  largely  escapes  taxation  entirely. 

From  1877  to  1897  the  aggregate  assessed  valuation  of  real  estate  in  Wisconsin 
increased  from  $274.417,883  to  $519,990,552,  or  about  89|  per  cent.  During  the  same 
period  the  assessed  value  of  personal  property  increased  from  $77,362,481  to 
$108,513,489,  or  only  about  40i  per  cent.  Assuming  that  the  aggregate  true  value 
of  personal  property  is  ordinarily  at  least  equal  to  that  of  real  estate  and  keeps 
pace  with  it  in  a  growing  Commonwealth,  these  facts  indicate  not  only  that  per- 
sonal property  is  very  largely  withheld  in  this  State,  but  that  the  practice  is 
steadily  growing. 

In  1897  the  total  assessed  value  of  money,  credits,  notes,  bonds,  and  mortgages 
in  the  State  was  $20,677,671.  This  amount  is  about  19i  per  cent  of  all  personal 
property  and  is  only  3J  per  cent  of  the  assessed  value  of  all  real  and  personal 
property. 

"The  small  fraction  of  this  class  of  property  actually  assessed  is  chiefly 
owned  by  persons  who  have  not  acquired  the  art  of  evasion  or  whose  scruples 
will  not  permit  them  to  evade  the  law,  and  those  whose  situation  is  such 
that  their  property  affairs  are  for  the  time  being  exposed  to  inspection,  as  in  the 
case  of  estates  in  the  probate  court  and  the  like. 

"The  pernicious  custom  of  undervaluation  of  all  classes  of  property  fosters 
and  promotes  the  practice  of  evasion.  • 

"Again,  very  large  numbers  of  people  regard  the  taxation  of  moneys  loaned  and 
full  taxation  also  of  the  property  upon  which  the  loan  is  secured  as  double  taxa- 
tion which  they  have  a  moral  right  to  evade.  As  the  property  itself  can  not 
ordinarily  be  hidden,  the  intangible  thing,  the  mortgage,  is  kept  out  of  sight  if 
possible." 

MORTGAGES. 

Under  the  system  existing  in  this  State  a  mortgage  of  real  estate  is  deemed  per- 
sonal property,  and  is  liable  to  taxation  as  such  according  to  its  value.  The  real 
estate  covered  by  the  mortgage  is  also  liable  to  taxation  according  to  its  value, 
without  reduction  on  account  of  the  mortgage. 

While  no  definite  data  are  obtainable  from  assessment  statistics  to  show  the 
value  of  mortgages  actually  assessed  for  taxation,  it  is  shown  that  only  a  very 
small  proportion  of  mortgages  liable  to  taxation  in  Wisconsin  are  in  fact 
assessed. 

The  commission,  after  this  showing,  state  that  "a  considerable  number  of  the 
ablest  investigators  have  frankly  declared  that  the  direct  taxation  of  intangible 
assets  as  property  by  the  valuation  method  is  wholly  impracticable  as  to  those 
who  seek  to  evade,  and  very  unjust  as  to  those  who  do  not.  But  the  greater  num- 
ber of  suggestions  and  demands  have  been  for  more  stringent  laws  and  more 
drastic  methods  to  compel  individuals  to  disclose  what  they  have  of  this  kind  of 
property,  and  to  compel  assessors  to  discover  and  assess  the  same.  State  legisla- 
tures have  frequently  enacted  laws  of  this  character  and  many  States  have  for 
years  maintained  most  rigid  systems  in  this  respect,  but  in  no  case  have  we  found 
that  substantial  or  satisfactory  results  have  been  obtained.  Professor  Ely,  in  his 
work  on  taxation,  speaking  of  such  systems,  says:  'It  is  characteristic  of  this 
system  that  the  more  you  perfect  it  the  worse  you  make  it.'  " 

The  commission,  after  discussing  the  experience  of  Ohio,  New  York,  California, 
and  Massachusetts  on  the  taxation  of  such  securities,  says:  "While  fully  con- 
curring in  the  conclusion  reached  in  the  other  States  that  an  attempt  to  tax 


140  INDUSTRIAL    COMMISSION. 

directly  most  forms  of  intangible  assets  is  only  partially  successful,  and  that  so 
far  as  successful  the  law  operates  quite  unequally,  we  are  still  unable  to  recom- 
mend the  repeal  of  the  laws  for  the  taxation  of  such  property  at  the  present  time. 
Our  chief  reason  for  this  is  the  want  of  a  complete  substitute  meeting  our 
approval." 

The  commissioners  recommend  as  a  partial  substitute  an  inheritance  tax.  They 
also  recommend  that  the  entire  administration  of  the  tax  laws  be  placed  in  the 
bands  or  at  least  under  rigid  supervision  of  capable  and  disinterested  agents  of 
the  State,  to  give  their  entire  time  to  official  duty,  such  agents  to  consist  of  a 
State  board  or  officer  and  such  subordinate  officers  as  may  be  necessary. 

TAXATION  OF  CORPORATIONS. 

Except  as  otherwise  specially  provided,  corporations  pay  taxes  upon  property 
valuations  in  the  same  way  as  natural  persons,  and  this  applies  to  foreign  corpora- 
tions doing  business  in  the  State  as  well  as  to  those  organized  under  the  laws  of  the 
State.  But  stock  in  such  corporations  as  are  required  to  pay  taxes  upon  their 
property  in  the  same  manner  as  individuals  is  expressly  exempted  from  taxation. 

As  to  all  corporations  taxed  upon  property  valuation,  there  «,re  no  special  pro- 
visions for  a  tax  on  corporate  franchises. 

Upon  organization  domestic  corporations  pay  a  fee  of  $25  per  thousand  dollars 
of  capital  for  incorporating  if  the  capital  stock  is  $25.000  or  less,  and  §1  per 
thousand  in  addition  for  each  $1,000  of  capital  stock  over  and  above  $25,000. 

Foreign  corporations  desiring  to  do  business  within  the  State  file  with  the  sec- 
retary of  state  an  authenticated  copy  of  their  articles  of  association,  and  pay 
therefor  a  fee  of  $25.  These  fees  applied  to  corporations  are  not  regarded  as  a 
franchise  tax. 

The  real  property  of  corporations  is  required  to  be  taxed  in  the  assessment  dis- 
trict where  located  at  local  rates. 

Personal  property  belonging  to  foreign  corporations  is  assessed  in  the  assess- 
ment district  where  the  agent  in  charge  resides;  or  if  none,  wherever  such  property 
is  located. 

The  personal  property  of  domestic  corporations  is  assessed  in  the  district  where 
the  principal  office  or  place  of  business  is  located,  by  local  assessors,  and  is  taxed 
at  local  rates. 

The  legislature,  recognizing  from  the  earlier  experience  of  the  State  the  imprac- 
ticability of  assessing  such  property  in  separate  parts  or  the  franchises  separately, 
recently  made  special  provisions  as  to  mains,  hydrants,  pipes,  and  other  fixtures 
and  appurtenances  of  waterworks,  gas,  and  electric  light  plants  not  owned  or 
operated  by  any  municipality.  Such  property,  and  all  real  estate  necessarily  used 
in  the  operating  of  such  plants,  including  machinery,  corporate  franchises,  if 
operated  by  a  corporation — in  short,  the  entire  property  of  such  a  company — is 
required  to  be  valued  and  assessed  together  as  a  single  item  or  unit  and  as  personal 
property  in  the  assessment  district  where  the  principal  place  of  business  is  located. 

Further  special  provisions  are  made  for  the  apportionment  of  such  values  where 
the  mains,  pipes,  poles,  wires,  etc.,  of  such  companies  are  partly  in  one  and  partly 
in  another  taxing  district.  Such  property  is  taxed  at  local  rates  upon  such 
assessed  valuations  in  the  same  way  as  other  personal  property. 

RAILROADS. 

In  1854  a  statute  was  passed  by  which  "  the  legislature  committed  itself  to  the 
theory  of  taxing  railroads  on  the  basis  of  gross  earnings."  This  system  has  since 
been  adhered  to  and  still  prevails,  changes  in  taxation  rates  having  been  made 
from  time  to  time  and  railroads  classified  according  to  amount  of  gross  earnings 
per  annum. 

The  tracks,  right  of  way,  depot  grounds  and  buildings,  machine  shops,  rolling 
stock,  and  all  other  property  necessarily  used  in  operating  any  railroad  in  this 
State,  belonging  to  any  railroad  company,  including  pontoon  and  pile  pontoon 
railroads,  are  exempt  from  taxation  for  any  purpose,  except  special  assessments 
for  local  improvements  in  cities  and  villages,  such  property  coming  under  the 
license  system.  All  lands  owned  or  claimed  by  any  such  railroad  company  not 
adjoining  its  track  are  subject  to  all  taxes. 

Every  railroad  company  and  every  person  operating  a  railroad  in  the  State, 
except  railroads  operated  by  horse  power,  is  required  to  make  and  return  to  the 
State  treasurer,  upon  blanks  to  be  furnished  by  the  treasurer,  before  the  10th  day 
of  February  in  each  year,  a  true  statement  of  the  gross  earnings  for  the  preced- 
ing calendar  year,  of  the  number  of  miles  of  road  operated  by  such  company  or 


WISCONSIN    CORPORATION    TAXES.  141 

person,  and  the  gross  earnings  per  mile  per  annum  during  such  year.  Such  state- 
ment must  be  verified  by  the  oath  of  the  secretary  or  treasurer  of  the  company 
or  of  the  person  so  operating  such  railroad. 

Upon  the  return  of  such  statement  and  payment  of  the  license  fee  hereinafter 
stated  such  company  or  person  is  entitled  to  and  receives  from  the  State  treasurer 
a  license  to  operate  such  railroad  for  the  calendar  year  commencing  on  the  1st 
day  of  January  preceding. 

The  annual  license  fees  required  to  be  paid  are  as  follows: 

1.  Four  per  cent  of  the  gross  earnings  of  all  railroads,  except  those  operated 
on  pile  and  pontoon  or  pontoon  bridges,  whose  gross  earnings  equal  or  exceed  $3,000 
per  annum  per  mile  of  operated  railroad. 

2.  Three  and  one-half  per  cent  of  the  gross  earnings  of  railroads,  except  those 
operated  on  pile  and  pontoon  bridges,  whose  gross  earnings  equal  or  exceed  $2,500 
and  less  than  $3,000  per  annum  per  mile  of  operated  railroad. 

3.  Three  per  cent  of  the  gross  earnings  of  all  railroads,  except  those  operated 
on  pile  and  pontoon  or  pontoon  bridges,  whose  gross  earnings  equal  or  exceed 
$2,000  and  are  less  than  $2,500  per  annum  per  mile  of  operated  railroad. 

4.  Five  dollars  per  mile  of  all  operated  railroads,  except  those  operated  on  pile  or 
pontoon  bridges,  whose  gross  earnings  equal  $1,500  per  mile  per  annum  and  are 
less  than  $2,000  per  annum  per  mile  of  operated  road,  and  in  addition  2|  per  cent  of 
their  gross  earnings  in  excess  of  $1,500  per  annum  per  mile  and  under  $2,000  per 
mile  per  annum. 

5.  Five  dollars  per  mile  of  operated  railroad  by  all  companies  whose  gross  earn- 
ings are  less  than  $1,500  per  mile  per  annum. 

6.  Two  per  cent  of  the  gross  earnings  of  all  railroads  which  are  operated  on 
pile  and  pontoon  or  pontoon  bridges,  which  gross  earnings  shall  be  returned  as  to 
such  parts  thereof  as  are  within  the  State. 

This  license  fee  is  based  upon  the  gross  earnings  from  operation  in  the  State, 
including  such  proportion  of  earnings  from  interstate  traffic  as  is  calculated  to 
have  been  earned  within  the  State. 

One-half  the  license  fee  is  required  to  be  paid  at  the  time  the  license  is  issued, 
and  one-half  before  the  10th  day  of  August  in  each  year. 

The  penalty  attached  for  neglect  to  obtain  such  license  or  to  pay  the  fee  there- 
for, or  any  part  thereof,  is  declared  to  be  the  forfeiture  of  the  sum  of  $10,000  to 
the  State,  to  be  recovered  by  an  action  brought  by  the  attorney-general  therefor, 
and  the  forfeiture  of  all  rights,  privileges,  and  franchises;  but  such  company  or 
person  so  neglecting  may  make  such  return  and  pay  such  license  fee  upon  appli- 
cation to  the  court  in  which  such  action  to  declare  the  forfeiture  is  pending,  and 
upon  such  terms  as  such  court  shall  direct. 

The  blanks  furnished  by  the  State  treasurer  for  such  statement,  and  which  must 
be  fully  filled  out,  require  the  statement  of  gross  receipts  to  be  itemized,  showing 
receipts  separately  from  passengers,  mails,  express  companies,  freight,  use  of 
cars,  sleeping-car  companies  for  transportation  of  sleeping  cars,  and  from  all  other 
sources,  specifying  the  same;  also  the  gross  receipts  as  earned  or  received  each 
month,  the  number  of  miles  in  operation  on  December  31  next  preceding,  and  the 
number  of  miles  built  and  operated  in  the  preceding  calendar  year. 

The  money  derived  from  such  taxation  is  paid  into  the  general  fund  of  the 
State,  and  is  applied  to  the  general  State  expenses,  thus  giving  all  districts  of  the 
State  equal  benefit  from  such  taxation  by  reducing  the  amount  of  State  taxes, 
whether  or  not  such  districts  are  traversed  by  railroads. 

This  general  distribution  of  railroad  license  fees  is  the  cause  of  some  complaint, 
because  of  the  amount  of  such  property  centered  in  the  cities.  A  partial  answer 
is  made  that  railroads  are  peculiarly  subject  to  the  control  of  the  State,  derive 
their  valuable  franchises  from  the  State,  and  at  times  are  vitally  dependent  upon 
the  State  for  protection. 

As  hereinbefore  stated,  this  method  of  taxation  has  been  held  to  be  constitutional. 
While  the  method  as  applied  to  railroads  carrying  on  interstate  commerce  can 
hardly  be  conceded  by  railroad  companies  to  be  within  the  Federal  Constitution, 
it  has  been  generally  acquiesced  in  as  reasonably  satisfactory.  Indeed,  we  were 
informed  by  public  officials  of  that  State  that  railroad  companies  generally  pre- 
ferred to  be  taxed  by  this  method,  even  though  the  amount  of  taxes  imposed 
should  be  as  large  or  even  somewhat  larger  than  under  the  general  property  tax, 
because  of  its  simplicity,  reliability,  certainty,  and  cheapness  to  both  State  and 
railroads. 

From  the  table  compiled  by  a  tax  commissioner  appointed  by  the  legislature  of 
Wisconsin  in  1898  to  investigate  and  report  upon  the  subject  we  find  that  rail- 
roads of  the  first  class,  the  cost  of  construction  of  which  aggregated  $275,013,119, 
paid  a  tax  of  $1,238,065.14,  or  about  forty-five  one-hundredths  of  1  per  cent  of  such 
cost. 


142  INDUSTRIAL    COMMISSION. 

Roads  of  the  third  class,  costing  $1,051,432,  paid  a  tax  of  $3,005.81,  or  about 
twenty-eight  one-hundredths  of  1  per  cent  of  the  cost. 

Roa'ds  of  the  fourth  class,  costing  $11,506,940,  paid  a  tax  of  $4,645.32,  or  about 
four  and  one-third  one-hundredths  of  1  per  cent  of  the  cost. 

Roads  of  the  fifth  class,  costing  $15,253,962,  paid  a  tax  of  $2,487.61,  or  one  and 
six-tenths  one-hundredths  of  1  per  cent  of  the  cost. 

There  are  no  roads  belonging  to  the  second  class. 
« 

The  yield  of  the  railroad  taxes  for  the  years  1882-1898  is  shown  by  the  following 
table: 

Fiscal  year  ending  September  30 — 

1882 $586,328.58 

1883 683,082.51 

1884. 754,269.44 

1885 733,195.57 

1886 747,870.99 

1887 „  763,994.56 

1888 A 1,068,632.96 

1889 ..._f 947,772.04 

1890 1,008,559.04 

1891 1,140,046.64 

1892 _ 1.220,674.88 

1893 1,156,260.75 

1894 1,438,758.66 

1895. 1,175,752.52 

1896 1,172,793.62 

1897 1,265,094.54 

1898. 1,247,357.03 

The  gross  earnings  of  Wisconsin  roads  for  1898  were  $35,191,000  and  the  net 
earnings  $12,225,000. 

The  taxes  paid  that  year  were  $1,247.357,  or  about  one-tenth  of  the  net  earnings. 

As  stated  elsewhere,  the  cost  of  this  class  of  property  affords  no  reliable  criterion 
of  its  true  value.  This  is  illustrated  by  the  business  condition  of  Wisconsin  rail- 
roads. While  some  are  operated  with  profit  and  pay  large  dividends,  others  are 
not,  and  some  are  in  the  hands  of  receivers,  this  class  of  property  being  of  such 
peculiar  character,  its  corporate  elements  of  value  so  fluctuating  and  changeable, 
that  it  can  hardly  be  measured  by  the  standards  applied  to  general  property.  The 
true  cash  value  of  a  railroad  can  probably  be  determined  only  by  the  result  of  its 
operation  for  a  period  of  years,  regardless  of  its  cost. 

In  1899  a  determined  effort  was  made  in  the  legislature  to  change  the  method 
of  taxation  in  the  State,  and  also  to  increase  the  amount  of  taxes  or  license  fees, 
but  nothing  definite  in  that  direction  was  accomplished. 

A  statute  was  enacted  creating  a  State  tax  commission  for  the  purpose  of 
investigating  the  existing  system  of  taxation  and  reporting  the  result  of  such 
investigation  to  the  legislature,  with  recommendations  for  the  improvement  of 
the  system  and  the  equalization  of  taxes  throughout  the  State. 

This  commission  is  now  actively  engaged  in  carrying  out  its  important  work 
and  giving  special  attention  to  the  investigation  of  the  subject  of  railroad  taxation, 
with  a  view  to  determining  whether  or  not  the  present  system  of  license  fees  on 
gross  earnings  should  be  abolished  and  the  ad  valorem  method,  so  called,  adopted 
for  the  taxation  of  railroad  property;  or,  if  the  present  system  should  be  retained, 
what  method  should  be  adopted  to  determine  the  percentage  of  gross  earnings 
to  be  paid  which  will  make  the  tax  equal  to  the  rate  of  taxation  imposed  on  other 
property. 

Governor  Scofield,in  his  message  to  the  legislature  for  1899,  made  the  following 
comments  and  recommendations  as  to  the  operation  of  the  license  system: 

"  I  am  convinced  that,  while  the  license  system  of  taxing  certain  corporations 
now  in  force  is  the  most  practicable  method  yet  evolved,  it  yet  has  elements  of 
unfairness  and  inequality  which  might,  partially  at  least,  be  eliminated. 
Our  present  graded  license  system  of  taxing  the  railroad  companies  contains  some 
glaring  inconsistencies.  We  have  under  this  system  five  classes  of  roads,  the 
classification  being  based  upon  the  earnings  per  mile.  The  first  class  pays  4  per 
cent  upon  its  gross  earnings.  The  second  class  is  taxed  3£  per  cent  on  its  gross 
earnings.  The  fourth  class  pays  $5  per  mile  and  2|  per  cent  on  all  earnings  over 
$1,500  per  mile  up  to  $2,000  per  mile.  The  fifth  class  pays  $5  per  mile  only. 

"  The  report  of  the  railroad  commissioner  of  the  State,  which  will  be  laid  before 
you,  contains  some  figures  which  show  the  inequalities  of  this  classification.  For 
instance,  the  class  of  roads  which  pay  4  per  cent  of  their  gross  earnings  pay  the 


WISCONSIN    CORPORATION    TAXES. 


143 


equivalent  of  a  rate  of  forty-five  one-hundredth s  of  1  per  cent  upon  the  cost  of 
the  road.  The  third  class,  which  pays  3  per  cent  of  their  gross  earnings,  pays  but 
twenty-eight  one-hundredths  of  1  per  cent  upon  the  cost.  The  fourth  class  pays 
but  four  and  one-third  one-hundredths  of  1  per  cent  upon  the  cost,  while  the  fifth 
class  pays  but  one  and  eight-tenths  one-hundredths  of  1  per  cent  upon  the  cost. 

"  The  commissioner's  report  shows  that  some  of  the  roads  which  pay  the  trifling 
sum  of  $5  per  mile  in  taxes,  and  from  which  the  aggregate  sum  received  varies 
from  $60  upward,  show  in  their  own  reports  large  earnings,  and,  in  some  cases, 
that  the  management  of  the  roads  have  been  able  to  pay  large  dividends. 

"  In  view  of  these  very  noticeable  inconsistencies  I  recommend  that  the  classi- 
fication be  abolished  entirely  and  that  a  uniform  license  fee  upon  the  gross  earn- 
ings be  charged  all  roads  doing  business  within  the  State,  regardless  of  what 
their  mileage  or  earnings  may  be.  If  the  4  per  cent  fee  upon  the  gross  earnings 
which  the  first-class  roads  now  pay  were  charged  all  of  the  roads,  the  income  of 
the  State,  based  upon  the  returns  for  the  past  year,  would  be  largely  increased." 

In  personal  conversation  with  Governor  Scofield,  who  has  apparently  given  the 
subject  of  taxation  in  Wisconsin  very  careful  thought  and  study,  he  highly  com- 
mended the  license  system  as  applied  to  the  taxation  of  railroads,  the  tax  being 
levied  by  the  State  for  State  purposes,  stating  that  he  regarded  it  as  the  best  system 
yet  devised  for  the  taxation  of  such  property;  that,  in  his  opinion,  the  rail- 
roads in  Wisconsin  paid  more  taxes  according  to  property  value  than  any  other 
corporate  property  in  the  State;  and  that  he  was  inclined  to  the  opinion,  from  the 
investigation  he  had  made,  that  under  that  system  they  were  paying  their  full 
proportionate  share  of  taxation,  apparently  having  taken  into  consideration  in 
reaching  that  conclusion  the  fact  that  real  estate  is  grossly  undervalued  and 
that  a  vast  amount  of  personal  property  escapes  taxation  under  the  local  assess- 
ment system. 

SLEEPING-CAR  COMPANIES. 

By  an  act  passed  in  1883  sleeping-car  companies  were  required  to  pay  an  annual 
license  fee  of  2  per  cent  of  their  gross  earnings  made  by  the  use  of  such  cars 
between  points  within  the  State  during  the  preceding  calendar  year. 

In  1885  the  statute  was  amended,  increasing  the  amount  to  4  per  cent  of  the  gross 
earnings,  which  continued  to  be  the  rate  until  the  year  1899.  The  supreme  court 
of  Wisconsin  construed  the  act  to  mean  that  under  its  provisions  the  companies 
were  only  required  to  return  the  gross  earnings  they  derived  from  the  transporta- 
tion of  passengers  from  one  point  to  another  wholly  within  the  State,  and  if  such 
were  not  the  construction  of  the  act  it  would  be  unconstitutional,  as  interfering 
and  restricting  interstate  commerce.  (State  v.  Pullman  Co.,  64  Wis.,  99.) 

This  decision  was  put  to  a  practical  use  by  some  sleeping-car  companies  by  sell- 
ing to  a  passenger  desiring  transportation  between  two  points  within  the  State  a 
ticket  to  some  point  beyond  the  State  line.  This  increased  mileage  was  of  no 
benefit  to  the  passenger,  and  the  sale  was  not  reported  in  the  annual  report  of 
earnings. 

The  limited  amount  of  earnings  so  returned  and  the  comparatively  small  benefit 
derived  by  the  State  from  such  taxation  is  shown  by  the  following  table  of  the 
yield  of  sleeping-car  company  taxes  in  the  years  1890  to  1898,  inclusive: 


1890 $1,365.67 


1891 


894. 32 


1895 $503.80 

1896                          2,031.14 

1897          904.75 

1898  ..                                    ..-  852.69 


1892 1,214.96 

1893 1,193.04 

1894 ;. 1,223.39 

In  1899  an  act  was  passed  which  provides  for  an  assessment  of  the  actual  value 
of  the  property  of  sleeping-car  companies  within  the  State. 

By  the  provision  of  this  act  each  sleeping-car  company,  wherever  organized  or 
incorporated,  including  companies  owning  dining,  buffet,  chair,  parlor,  and  palace 
cars,  is  required  to  file  with  the  State  treasurer,  during  the  month  of  July  in 
each  year,  a  report  under  oath  for  the  year  ending  April  30  next  preceding,  con- 
taining the  name  of  the  company,  location  of  principal  office,  nature  and  when 
organized,  officers,  chief  officer  or  managing  agent  in  Wisconsin,  total  amount  of 
capital  stock,  number  of  shares,  par  value  and  market  value,  or,  if  no  market  value, 
the^actual  value  of  the  shares,  situation  and  value  of  its  real  estate  in  Wisconsin 
used  in  the  business,  location  and  value  of  all  its  real  estate  outside  of  Wisconsin 
used  in  the  business,  total  length  of  lines  of  railroad  over  which  the  cars  of  such 
company  were  used  in  Wisconsin  and  elsewhere,  total  length  of  lines  over  which 
the  cars  of  such  company  were  used  in  Wisconsin,  and  such  other  facts  or  infor- 
mation as  such  company  may  deem  material  upon  the  question  of  the  taxable 
value  of  its  property  within  the  State. 


144 


INDUSTRIAL    COMMISSION. 


The  State  board  of  assessment,  consisting  of  the  secretary  of  State,  State  treas- 
urer, and  attorney-general,  meets  annually  and  proceeds  to  assess  and  levy  a  tax 
upon  the  property  of  such  sleeping-car  companies  according  to  the  following 
rules,  after  hearing  such  testimony  and  argument  as  such  sleeping-car  companies 
may  offer: 

First.  It  shall  find  the  actual  value  in  money  of  the  entire  amount  of  capital 
stock  of  each  sleeping-car  company  used  in  its  sleeping-car  business,  and  from 
that  amount  it  shall  deduct  the  actual  value  of  all  real  estate  used  by  such  com- 
pany in  its  sleeping-car  business  without  the  State,  and  the  remainder  shall  be 
taken  and  considered  as  the  actual  value  of  the  capital  stock  of  such  company 
invested  in  its  sleeping-car  business. 

Second.  The  amount  so  obtained  is  then  divided  by  the  total  number  of  miles 
of  railroad  over  which  the  cars  of  such  sleeping-car  company  were  used,  to  obtain 
the  value  per  mile.  The  value  per  mile  is  then  multiplied  by  the  number  of  miles 
over  which  such  cars  were  run  within  the  State,  and  the  result  is  taken  and  con- 
sidered as  the  actual  value  of  the  property  of  such  sleeping-car  company  within 
the  State  of  Wisconsin  subject  to  taxation  and  assessment. 

The  board  thereupon  assesses  such  value  and  levies  a  tax  thereon  for  the  use 
of  the  State  at  the  average  rate  of  taxation,  State  and  local  consolidated,  of  the 
State  of  Wisconsin,  certifying  the  assessment,  rate  of  levy,  and  the  amount  of  the 
State  tax  to  the  State  treasurer,  who  thereupon  notifies  such  company  of  the  same 
by  registered  letter.  The  sleeping-car  company  is  then  given  30  days  after  the 
mailing  of  such  notice  within  which  to  pay  such  tax. 

Upon  neglect  to  so  pay  the  tax,  a  suit  may  be  commenced  by  the  attorney-gen- 
eral against  such  company  to  collect  the  same,  together  with  a  penalty  of  10  per 
cent  of  the  total  amount  of  such  tax  and  costs  of  suit. 

Sleeping-car  property  which  is  owned  by  railway  companies,  and  the  gross 
earnings  of  which  are  taxed  as  a  part  of  the  gross  earnings  of  such  railway  com- 
panies, is  exempt  from  taxation  under  the  provisions  of  the  foregoing  act. 

The  result  of  the  operation  of  this  law  in  1899  is  shown  by  the  following  state- 
ments: 


Items. 

Wagner  Palace 
Car  Co. 

Pullman  Pal- 
ace Car  Co. 

Actual  value  of  entire  amount  of  capital  stock 

$14,  000,  000 

$15,  299,  000 

Actual  value  of  real  estate  used  by  such  company  in  its  business 
within  the  State          •                     

4,  000,  000 

Actual  value  of  capital  stock  

10,000,000 

15,  299,  000 

Total  miles  of  railroad  over  which  the  cars  of  the  company  were  run. 
Value  per  mile                           

74,000 
$135,  135 

129,  679 
$117,  975 

Number  of  miles  within  the  State                                                  

1,  374.  8 

1,108 

Actual  value  of  property  within  this  State  subject  to  assessment  and 
taxation                                     .                             

$185,  783.  60 

$130,127.40 

Average  rate  of  taxation,  State  and  local  consolidated,  in  the  State  .. 
Total  amount  of  tax                    

$0.  028152108 
$5,230.20 

$0.  028152108 
$3,  663.  36 

FREIGHT-LINE  COMPANIES  AND  EQUIPMENT  COMPANIES. 

They  are  required  to  make  the  same  statement,  and  the  value  of  their  property 
is  assessed  by  a  similar  process  and  at  the  same  rate  as  sleeping-car  companies. 
The  results  for  1899  were  as  follows: 

Equipment  companies  or  freight  lines,  1899. 


Items. 

Burton  Stock 
Car  Co. 

Swift  Refrig- 
erator Trans- 
portation Co. 

Kansas  Citv 
Dressed  Beef 
Line,  Kansas 
City  Fruit  Ex- 
press, Kansas 
Citv  Tank 
Line. 

Mather  Hu- 
mane Trans- 
portation Co. 

Actual  value  of   entire  amount  of 
capital  stock        .        

$57,  014.  50 

$900,000.00 

$513,550.30 

$73,  760.  50 

Actual  value  of  real  estate  used  by 
such  company  in  its  business  within 
the  State  

50,000.00 

Actual  value  of  capital  stock  

7,  014.  50 

900,  000.  00 

513,550.30 

73,  760.  50 

WISCONSIN    CORPOEATION    TAXES. 

Equipment  companies  or  freight  lines,  1899 — Continued. 


145 


Burton  Stock 
Car  Co. 

Swift  Refrig- 
erator Trans- 
portation Co. 

Kansas  City 
Dressed  Beef 
Line,  Kansas 
City  Fruit  Ex- 
press, Kansas 
City  Tank 
Line. 

Mather  Hu- 
mane Trans- 
portation Co. 

Total  miles  of  railroad  over  whic 
cars  of  the  company  were  run 
Value  per  mile  

hthe 

26,  515,  623 
$0.  00026 
7,004 

$1.82 

$0.  028152108 
fO.05 

180,000 
$5.00 
8,270 

$16,350 

$0.  028152108 
$460.  29 

49,  934,  250 

$0.010284 
277,  119 

$2,  849.  89 

$0.  028152108 
$80.23 

190,200 

$0.  3878 
5,501 

$2,  133.  29 

$0.028152108 
$60.  06 

Number  of  miles  within  this  State  
Actual  value  of  property  within  this 
State   subject  to   assessment   and 
taxation             

Average  rate  of  taxation,  State  and 
local  consolidated,  in  the  State  
Total  amount  of  tax 

Western  Re- 
frigerator 
Line. 

Western  Re- 
frigerator 
Transit  Co. 

Cudahy  Mil- 
waukee Re- 
frigerator 
Line. 

The  Cudahy 
Refrigerator 
Co. 

Union  Re- 
frigerator 
Transit  co. 

Actual  value  of  entire  amount 
of  capital  stock  

$33,  448.  19 

$80,  000.  00 

$59,  100.  00 

$100,  000.  00 

$200,000.00 

Actual  value  of  real  estate  used 
by  such  company  in  its  busi- 
ness within  the  State 

Actual  value  of  capital  stock.  .  . 

Total  miles  of   railroad    over 
which  the  cars  of  the  com- 
T>anv  were  run 

1 

33,  448.  19 

80,  000.  00 

59,  100.  00         100,  000.  00 

200,  000.  00 

195,  362 

$0.  1712 

5,653 
$967.80 

$0.  028152108 
$27.  25 

195,  362 
$0.  4094 

5,653 
$2,314.34 

$0.028152108 
$65.  15 

6.  096,  481 
$0.  009694 

275,036 
$2,666.20 

$0.028152108 
$75.  06 



21,275,211 
$0.  00457 

23,  468 
$107.  25 

$0.028152108 
$3.02 



195,  362 
$1.  0237 

5,704 
$5,839.18 

$0.  028152108 
$164.  39 

Value  per  mile  

Number  of  miles  within  this 
State  

Actual  value  of  property  within 
this  State  subject  to  assess- 
ment and  taxation  

Average  rate  of  taxation,  State 
and  local  consolidated,  in  the 
State                            

Total  amount  of  tax 

EXPRESS  COMPANIES. 

Prior  to  the  year  1899  the  only  tax  collected  from  express  companies  was  that 
levied  upon  their  tangible  property,  as  upon  the  property  of  private  persons, 
located  within  the  various  taxing  districts  of  the  State,  their  intangible  property 
wholly  escaping  taxation;  but  in  1899  an  act  was  passed  providing  for  the  assess- 
ment of  the  actual  value  of  their  property  within  the  State. 

By  the  provisions  of  this  act  any  person,  or  joint  stock  company,  partnership, 
association,  or  corporation,  whether  organized  or  incorporated,  conveying  to, 
from,  or  in  the  State  money  or  property  of  any  kind  by  express  (not  including 
railroad  or  steamship  companies  engaged  in  the  ordinary  transportation  business) 
is  deemed  to  be  an  express  company. 

Each  express  company  is  required  to  file  during  the  month  of  July  in  each 
year,  with  the  State  treasurer,  a  statement  in  the  form  prescribed  by  him  under 
oath,  showing,  with  reference  to  the  business  of  the  fiscal  year  ending  June  30 
next  preceding,  the  name  of  the  company,  its  nature,  location  of  principal  office, 
when  and  where  organized  or  incorporated,  officers,  authorized  capital  stock, 
capital  stock  issued,  number  of  shares,  their  par  and  market  value,  their  actual 
value;  the  situation,  income,  and  value  in  detail  of  its  real  estate  in  Wisconsin; 
the  total  income  and  cash  value  of  all  its  real  estate  situated  outside  the  State,  a 
full  and  correct  inventory  at  the  true  cash  value  of  its  personal  property,  includ- 
ing moneys  and  credits  within  the  State;  the  true  cash  value  of  all  its  personal 
property,  including  money  and  credits,  outside  the  State:  the  whole  length  and  the 
names  of  the  railroad  lines  and  water  and  stage  routes  over  which  it  did  business, 
and  separately,  in  detail,  the  portion  of  such  lines  and  routes  within  this  State, 
and  the  portion  of  such  routes  over  navigable  waters  of  the  United  States  within 
the  State,  and  such  other  facts  or  information  as  may  be  material  upon  the  question 
of  the  taxable  value  of  its  property  within  the  State. 

10 


146 


INDUSTRIAL    COMMISSION. 


The  State  board  of  assessment,  consisting  of  the  secretary  of  state,  State  treas- 
urer, and  the  attorney-general,  thereupon  meets  upon  the  third  Wednesday  of 
August  and  proceeds  to  assess  and  levy  the  tax  upon  the  property  of  such  express 
company  after  notice  to  such  company  of  the  time  of  hearing  upon  such  assess- 
ment. 

After  due  hearing  the  board  proceeds  to  determine  the  true  value  of  its  property 
according  to  the  following  rules: 

The  actual  value  in  money  of  the  entire  amount  of  capital  stock  is  found. 

From  the  amount  so  obtained  is  deducted  the  actual  value  of  all  real  estate 
situated  outside  the  State  and  the  actual  value  of  personal  property  not  used  in 
the  express  business. 

The  remainder  is  taken  to  be  the  actual  value  of  the  capital  stock  of  such  com- 
pany invested  in  its  business.  Such  amount  is  divided  by  the  total  number  of  miles 
of  railroad,  stage,  water,  and  other  routes  over  which  the  company  did  business, 
and  the  value  per  mile  so  obtained  is  multiplied  by  the  total  number  of  miles  of 
route  within  the  State,  exclusive  of  the  number  of  miles  of  water  route  over  nav- 
igable waters  of  the  United  States  within  the  State.  The  result  is  declared  to  be 
the  actual  value  of  the  property  of  such  express  company  subject  to  taxation. 

The  board  then  proceeds  to  assess  and  levy  a  tax  thereon  f*r  the  use  of  the 
State,  at  the  average  rate  of  taxation,  State  and -local,  consolidated,  of  the  State. 
The  tax  so  assessed  and  levied  is  declared  to  be  in  lieu  of  all  other  taxation. 

Failure  to  file  report  or  to  pay  the  tax  is  attended  by  a  penalty  of  10  per  cent  of 
the  amount  assessed  for  taxation,  together  with  the  costs  of  suit  brought  by  the 
attorney-general  to  recover  the  amount  of  such  tax. 

The  following  reports  will  show  the  methods  of  the  State  board  in  the  assess- 
ment of  express  companies  under  the  law  fixed  by  the  legislature  in  1899  and 
their  results: 

Express  companies,  1899. 


Items. 

Adams  Ex- 
press Co. 

American  Ex- 
press Co.  -Na- 
tional Express 
Co. 

Northern  Pa- 
cific Express 
Co. 

United  States 
Express  Co. 

Western  Ex- 
press Co. 

Actual  value  in  money  of  en- 
tire amount  of  capital  stock. 

812,000,000.00 

$24,  840,  000.  00 

$343,  000.  00 

$4,  500,  000.  00 

$50,  000.  00 

Value  of  real  estate  situated 
without  this  State  

3,  076,  567.  52 

5,  075,  857.  80 

735.94 

1,011,284  90 

Value  of  personal  property 
not  used  in  express  business. 

3,  962,  371.  21 

18,  262,  194.  48 

981,150.00 

Total  

7,  038,  938.  73 

23,  338,  052.  28 

735.  94 

1,  992,  434.  00 

Actual  value  of  capital  stock.  . 

4,  901,  061.  27 

1,  501,  947.  72 

342.  264.  06 

2,507,565.10 

50,  000.  00 

Total  miles  of  railroad,  stage, 
water,  and  other  routes 
over  which  the  company 
did  business  

29,  845 

41  609.75 

5  140 

61  367  69 

1  820  3 

Value  per  mile 

$166  227 

$36  096 

$66  588 

$40  861 

-"7    17 

Number  of  miles  over  which 
the  company  did  business 
in  this  State 

263 

3  154  67 

87 

2  045  14 

381  3 

Actual  value  of  the  property 
of  the  company  subject  to 
assessment  and"  taxation  in 
this  State 

$43  717.70 

$113  871  13 

$5  793  18 

$83  567  08 

$10  474.31 

Average  rate  of  taxation, 
State  and  local,  consoli- 
dated in  this  State 

$0  028152108 

$0  028152108 

$0  028152108 

$0  0028152108 

$0  028152108 

Total  amount  of  tax  

$1,230.75 

$3,  205.  71 

$163.  09 

$2,  352.  59 

$294.  87 

TELEGRAPH  COMPANIES. 

Telegraph  companies  are  required  to  file  annually  with  the  State  treasurer  a 
statement,  under  oath,  showing  the  total  number  of  miles  of  their  telegraph  line, 
and  the  number  of  miles  of  such  line  within  the  State,4  the  number  of  wires 
employed  on  each  division  of  such  line,  and  the  aggregate  number  of  miles  of  sin- 
gle wire  operated  within  the  State. 

Upon  the  filing  of  such  report  the  State  treasurer  issues  to  each  telegraph  com- 
pany a  license,  upon  payment  of  the  license  fee  for  State  purposes,  which  is  as  fol- 
lows: For  the  first  wire,  $1  per  mile;  for  the  second  wire,  50  cents  per  mile;  for  the 
third  wire,  25  cents  per  mile;  for  the  fourth  and  each  additional  wire,  20  cents  per 
mile. 


WISCONSIN    CORPORATION   TAXES. 


147 


The  yield  of  the  tax  for  the  years  1890-1898  was  as  follows: 

1890 ._  $7,775.77 

1891 8,691.16 

1892  _ 9, 225. 53 

1893 9,657.62 

1894 9,935.71 


1895... $9,999.45 

1896 10,817.56 

1897 10,684.28 

1898 10,882.15 


TELEPHONE  COMPANIES. 

Telephone  companies  annually  make  a  sworn  statement  of  their  gross  earnings 
for  the  fiscal  year  ending  December  31,  and  file  the  same  with  the  State  treasurer, 
who  thereupon  issues  to  each  telephone  company  an  annual  license,  upon  the  pay- 
ment of  the  license  fee,  as  follows:  If  the  amount  of  gross  earnings  be  over 
$100,000,  3  per  cent  of  such  gross  earnings;  if  under  $100,000,  2£  per  cent,  A  pen- 
alty of  $5,000,  to  be  paid  the  State,  together  with  forfeiture  of  rights  and  fran- 
chises, follows  the  neglect  to  obtain  such  license. 

Such  taxation  is  in  lieu  of  all  other  taxation,  and  an  additional  license  fee  can 
not  be  imposed  by  a  municipality.  (Wisconsin  Telephone  Company  v.  Oshkosh, 
62Wis.,32.) 

The  yield  of  such  taxes  for  the  years' 1890-1 898  was  as  follows: 


1895. $9,838.99 

1896_ 9,744.64 

1897 10,777.14 

15,477.59 


1890 $4,691.48 

1891 5,076.43 

1892. 5,520.43 

1893 11,705  71 

1894 9,716.29 

STREET-RAILWAY  AND  ELECTRIC  LIGHT  AND  POWER  COMPANIES. 

These  companies  are  required  to  pay  annually  to  the  treasurer  of  the  city  or 
village  from  which  their  franchise  is  derived  a  tax  upon  their  gross  earnings,  as 
shown  by  a  sworn  statement  filed  with  such  treasurer. 

The  rate  of  taxation  is  graduated  as  follows: 

1.  Three  per  cent  upon  the  first  $800,000  and  4  per  cent  upon  all  amounts  of  such 
receipts  over  $800,000. 

2.  Those  whose  gross  cash  receipts  are  less  than  $800,000  per  annum,  as  follows: 
One  and  one-half  per  cent  on  the  first  $250,000  or  less,  2|  per  cent  on  all  amounts 
of  such  receipts  over  $250,000.     Provision  is  made  for  the  apportionment  of  this 
license  fee  between  two  or  more  municipalities,  based  upon  the  number  of  miles 
of  track  or  wire  within  each;  also  where  the  track  extends  beyond  the  limits  of 
the  principal  municipality  to  a  town  or  village,  such  municipality  shall  receive  3 
portions  of  such  fee  to  1  in  such  town  or  village.     The  distinction  in  apportion- 
ment between  electric  companies  and  railroad  companies  is  based  on  the  theory 
that  the  former  are  distinctively  local  corporations,  and  that  there  is  less  reason 
for  payment  of  their  license  fees  into  the  general  funds  of  the  State. 

Of  the  taxes  so  collected,  the  State  receives  6  per  cent,  the  county  3  per  cent,  and 
the  municipalities  91  per  cent. 

Yield  of  taxes  to  State  on  street  railways  and  electric-light  companies,  being  6 
per  cent  of  the  whole: 

1896..  $746.73 

1897  ...  . 697.17 

1898 -  4,131.90 

GAS  AND  WATER  COMPANIES. 

Reference  has  already  been  made  to  the  manner  in  which  the  property  of  these 
companies  is  assessed.  In  addition,  we  quote  the  following  from  the  report  of  the 
tax  commission  of  1898: 

'SAfter  various  unsuccessful  attempts  in  some  cities  to  properly  tax  some  of  the 
corporations  of  these  classes,  and  after  several  decisions  of  the  supreme  court 
prescribing  the  legal  method,  a  statute  was  adopted  providing  for  the  taxing  of 
waterworks  companies  and  gas  plants. 

"  By  this  method  all  the  land,  pipes,  appurtenances,  and  franchises  are  treated  as 
personal  property  and  assessed  in  the  district  of  the  principal  office  of  the  company, 
and  the  taxes  are  collected  like  other  taxes  on  personal  property;  and  where  the 
property  is  in  more  than  one  municipality  the  law  provides  for  the  apportionment 
of  the  just  amount  to  each. 


148  LNDUSTKIAL    COMMISSION. 

"  The  statute  referred  to  is  based  upon  the  rule  expressed  by  the  supreme  court 
that  although  all  of  the  property  of  such  corporations,  including  the  franchises, 
should  be  assessed  and  taxed,  the  different  kinds  of  property  making  up  the  plant 
should  not  be  segregated,  but  should  be  treated  for  the  purposes  of  taxation  as  an 
entirety. 

"  The  representatives  of  several  companies  of  this  class  stated  that  they  would 
prefer  to  be  taxed  like  some  of  the  other  corporations,  on  the  basis  of  gross  earn- 
ings, and  suggested  that  even  if  the  percentage  were  so  adjusted  that  the  amount 
of  taxation  were  somewhat  increased  over  the  amount  paid  under  the  present 
system  they  would  prefer  to  bear  it,  in  consideration  of  greater  uniformity  and 
their  consequent  ability  to  anticipate  and  prepare  for  the  expense  and  fixed 
charges  of  their  business. 

"  There  would  seem  to  be  no  serious  difficulty  in  arriving  at  the  fair  value  of  this 
form  of  property,  and  we  do  not  recommend  any  change." 

These  are  local  taxes,  and  the  aggregate  amount  can  not  be  given. 

TRUST,  ANNUITY,  AND  GUARANTY  COMPANIES. 

These  companies  pay  to  the  State  treasurer  an  annual  license*  fee  of  $300,  and 
in  addition  thereto  2  per  cent  of  their  net  annual  income.  The  whole  of  such 
tax  is  received  by  the  State,  this  is  in  lieu  of  all  taxes  except  those  upon  real  estate. 
The  tax  paid  by  loan  and  trust  companies  in  1898  was  $2,604.10. 

BANKS. 

No  tax  is  assessed  upon  the  capital  of  banks,  but  the  stock  of  each  stockholder 
is  assessed  to  him  at  its  value,  as  other  taxable  property,  in  the  assessment  district 
where  such  bank  is  located.  The  value  of  real  estate  owned  by  banks  is  not 
deducted  from  shares. 

Upon  demand  of  the  assessor  the  names  of  the  stockholders  and  the  number 
of  shares  held  by  each  are  required  to  be  furnished  by  each  bank.  But  accumu- 
lated profits  and  surplus  over  and  above  the  capital  stock  paid  in  are  assessed  for 
taxation  to  such  bank. 

The  tax  commission  of  1898  says  that  a  comparison  of  the  assessed  valuation  of 
bank  stock  with  the  total  par  value,  as  shown  by  the  official  reports  in  1897,  dis- 
closed the  fact  that  the  assessors'  valuations  ranged  from  nothing  at  all  to  over 
200  per  cent. 

The  par  value  of  the  stock  in  National,  State,  and  private  banks  in  the  summer 
of  1897  was  $18,141 .689.26.  The  surplus  and  undivided  profits  held  by  these  banks 
amounted  to  $6,073,324,  making  a  total  of  $24,215,013.26,  while  the  total  assessment 
of  bank  stock  for  the  whole  State  was  $7,588,890,  or  31  per  cent. 

Making  certain  corrections  because  of  assessment  of  bank  stock  in  one  city 
under  another  head,  it  is  made  to  appear  that  the  assessed  valuation  of  bank  stock 
is  72  per  cent  of  its  par  value,  and  54  per  cent  of  the  sum  obtained  by  adding  the 
surplus  and  undivided  profits  to  the  par  value.  The  commission  says,  however, 
that  there  is  a  great  deal  of  bank  stock  in  the  State  that  pays  very  small  divi- 
dends, if  any,  and  is  not  salable  at  par. 

Notwithstanding  this,  the  tax  commission  says  that  there  is  no  form  of  property 
in  the  State  that  pays  a  larger  tax  relatively  than  the  banks,  and  they  give  the 
familiar  reasons  for  this  statement — that  full  reports  being  required  of  bank 
officers  and  the  value  of  the  capital  stock  being  easily  ascertained  by  assessors, 
shares  are  generally  assessed  at  a  larger  proportion  of  their  real  value  than  any 
other  form  of  property  except,  possibly,  real  estate. 

The  commission  refers  to  the  injustice  done  to  banks  in  some  cities  by  the  fail- 
ure of  assessors  to  adopt  a  uniform  method  of  determining  the  value  of  stock,  an 
evil  which  it  suggests  might  be  remedied  by  a  State  board. 

TITLE  GUARANTY  COMPANIES. 

Corporations  formed  for  the  purpose  of  insuring  or  guarantying  the  title  of  real 
estate  are  required  to  pay  to  the  State  the  same  license  fees  required  of  fire  insur- 
ance companies,  and  such  fees  are  to  be  in  lieu  of  all  other  taxes. 

BOOM  COMPANIES,  ETC. 

Persons  or  corporations  owning  or  operating  dams,  booms,  sluiceways,  or  other 
structures  in  any  navigable  stream  within  or  forming  part  of  the  boundary  of  the 
State  for  the  purpose  of  booming,  driving,  or  otherwise  handling  logs  and  timber 
of  any  kind,  having  authority  so  to  do  under  the  laws  of  this  State,  are  required 


WISCONSIN    CORPORATION    TAXES.  149 

to  pay  license  fees  of  2  per  cent  of  the  gross  earnings  of  the  business.  Where  the 
property  and  improvements  of  such  person  or  company  necessary  for  the  transac- 
tion of  his  or  its  business  have  been  taxed  by  the  town,  city,  or  village  where  the 
same  are  located,  then  the  amount  of  such  taxes  maybe  deducted  from  the  license 
fee  above  mentioned. 

PLANK  AND  TOLL  ROADS. 

Owners  of  plank  and  toll  roads  are  required  annually  to  pay  to  the  State  a 
license  fee  equal  to  3  per  cent  of  the  gross  earnings  of  such  roads,  the  same  to  be 
in  lieu  of  all  other  assessments  or  taxes.  The  tax  paid  by  these  roads  in  1898  was 
$683.59. 

FIRE  AND  NAVIGATION  INSURANCE  COMPANIES. 

Companies  of  these  classes,  except  town,  church,  and  mutual  insurance  com- 
panies in  cities  and  villages,  transacting  business  in  Wisconsin  are  required  to  pay 
to  the  commissioner  of  insurance  as  a  license  fee  "  2  per  cent  of  the  amount  of 
gross  income,  including  cash,  notes,  receipts,  or  installment  notes  taken  for  pre- 
miums and  assessments  on  premium  notes  received  by  such  company  during  the 
preceding  year  in  this  State,  as  shown  by  the  annual  statement  of  its  business 
required  to  be  made  by  law." 

They  also  pay  for  the  benefit  of  organized  fire  departments  in  cities  and  villages 
where  they  are  maintained  2  per  cent  of  the  premiums  received  in  such  munici- 
palities, make  certain  contributions  to  the  expense  of  maintaining  fire  patrols 
and  fire  departments  in  cities  and  villages  under  certain  conditions,  and  pay 
various  items  of  fees  to  the  insurance  commissioner. 

While  these  exactions  are  not  imposed  by  the  exercise  of  the  taxing  power  of 
the  State,  but  under  the  police  power  of  the  State,  they  considerably  add  to  the 
burdens  of  such  companies,  and  should  be  mentioned  in  this  connection.  The 
amount  of  this  2  per  cent  tax  in  1898  was  $87,029.61. 

LIFE  INSURANCE  COMPANIES. 

Under  an  act  of  1899,  life  insurance  companies,  excepting  fraternal  insurance 
societies,  organized  under  the  laws  of  the  State,  not  purely  assessment  companies, 
pay  to  the  State  treasurer  an  annual  license  fee  of  1  per  cent  of  their  gross  income, 
excepting  therefrom  the  rents  of  real  estate  upon  which  such  company  has  paid 
taxes  assessed  as  upon  other  real  estate  similarly  situated,  and  excepting  income 
from  interest  on  United  States  bonds. 

Such  insurance  companies  organized  without  the  State  pay  to  the  State  treas- 
urer an  annual  license  fee  of  1  per  cent  of  all  premiums  collected  from  residents 
of  the  State  during  the  preceding  calendar  year.  The  entire  premiums  collected, 
including  premium  notes  and  dividends  paid  to  the  insured,  are  so  taxed. 

All  other  insurance  companies  except  fraternal  societies,  including  assessment 
companies,  pay  to  the  State  treasurer  an  annual  license  of  $300. 

Prior  to  1899  life  insurance  companies  paid  an  annual  license  fee  of  $300,  and 
domestic  insurance  companies  paid  in  addition  2  per  cent  of  their  cash  receipts 
for  premiums.  This  tax  was  in  lieu  of  all  taxation  except  on  real  estate.  For- 
eign assessment  companies  paid  an  annual  license  fee  of  $25.  Domestic  assess- 
ment companies  pai4  no  tax.  The  amount  of  taxes  from  these  companies  in  1898, 
under  the  old  law,  was  $35,747.19. 

CASUALTY  COMPANIES. 

Casualty  companies  pay  to  the  commissioner  of  insurance  an  annual  license  fee 
of  2  per  cent  of  their  gross  premiums,  which  in  1898  amounted  to  $22,249.27. 

SUMMARY. 

The  total  income  of  the  general  fund  of  the  State  for  1898  was  $2,971,140.72. 
Of  this,  $1.429,179.69  was  received  from  license  fees,  as  shown  by  the  following 
table: 

Licenses. 

Railroads $1,247,357.03 

Sleeping-car  companies 

Telegraph  companies  ...  Jjjj  °°~-  Jjj 

Telephone  companies on 

Street-railway  companies  and  electric-light  companies - 


150  INDUSTRIAL    COMMISSION. 

Licenses — Continued . 

Loan  and  trust  companies  _ $2, 604. 10 

Log  driving  and  boom  companies 1, 769. 92 

Plank-road  companies ._ 683. 59 

Insurance  companies _ 145, 420. 72 


*     Total. 1,429,179.69 

Of  the  balance  of  general  fund  receipts,  amounting  to  $1,541.961.03,  $1,149,300.70 
was  received  by  State  levies  on  general  property  and  from  special  charges  and 
taxes  upon  civil  actions,  $332,660.33  being  received  from  charitable  and  penal 
institutions  and  from  sundry  and  miscellaneous  sources. 

REPORT  OF  THE  WISCONSIN  STATE  TAX  COMMISSION. 

Since  the  foregoing  report  of  the  Wisconsin  tax  system  was  prepared,  we  have 
received  the  first  biennial  report  of  the  Wisconsin  State  tax  commission,  an  able, 
conservative,  and  valuable  contribution  to  the  modern  literature^of  taxation,  con- 
taining some  matter  of  special  interest  at  this  time. 

The  preliminary  work  of  this  commission  in  1899  was  largely  devoted  to  the 
examination  of  the  tax  laws  in  the  several  States,  the  publications' of  leading  econ- 
omists and  financiers,  the  reports  of  tax  commissions  in  different  States  under 
various  systems  of  taxation,  and  recommendations  for  improvement  in  universally 
unsatisfactory  conditions. 

During  the  year  1900  the  commission  limited  the  scope  of  its  original  work 
largely  to  ascertaining  the  actual  and  assessed  values  of  the  different  kinds  of 
taxable  property  of  the  State  taxed  under  different  systems,  for  the  purpose  of 
comparing  the  taxes  paid  by  these  several  classes  and  ascertaining  the  relation 
of  taxes  paid  under  the  general-property  tax  and  under  the  license  system  in 
vogue  in  that  State,  or,  in  other  words,  of  determining  the  proportionate  burdens 
imposed  upon  different  classes  of  property. 

From  a  careful  examination  of  the  reports  of  sales  of  real  estate  and  assess- 
ments of  the  same  property  filed  each  year  by  the  registers  of  deeds  of  the  several 
counties  of  the  State  with  the  secretary  of  State,  and  other  data  and  information 
from  various  sources,  the  approximate  actual  value  of  the  taxable  real  estate  of 
Wisconsin,  based  upon  a  5-year  average  of  sales,  was  found  by  the  commission  to 
be  $1,192,867,499,  and  the  total  average  assessed  value  for  the  corresponding  5 
years  was  $518,824,553,  and  from  these  two  respective  sums  the  average  of  assessed 
value  was  found  to  be  43.4  per  cent  of  the  aggregate  actual  value. 

At  the  time  of  the  compilation  of  real  estate  sales  the  commissioners  also  made 
an  investigation  for  the  purpose  of  comparison  between  agricultural  property  and 
interests  represented  by  railroad  and  other  quasi-public  corporations.  For  this 
purpose  an  attempt  to  find  the  actual  values  of  property  based  upon  sales  was 
made,  although  they  point  out  the  difficulty  and  complexity  of  the  problem  of 
making  comparison  of  properties  differing  so  widely  in  product. 

In  the  compilation  of  data  of  farm  properties  they  sought  simply  to  find  some 
basis  for  comparison.  The  method  pursued  was  through  inquiry  among  6,000 
representative  farmers  fairly  distributed  throughout  the  State.  A  series  of  ques- 
tions was  propounded  calculated  to  discover:  First,  the  ratio  of  expense  to  gross 
income  of  agriculture;  second,  what  percentage  of  gross  income  and  income  from 
operation  the  farmer  pays  in  taxes;  third,  what  relation  the  assessment  of  per- 
sonal property,  comprising  implements  and  live  stock,  bears  to  his  total  assess- 
ment, and,  lastly,  the  opinions  of  farmers  as  to  the  ratio  which  the  assessed  value 
of  their  farm  real  estate  bears  to  the  real  value  of  the  property.  From  1,124 
replies,  sufficiently  clear  and  reliable  to  be  used  for  the  purpose,  in  which  all  but 
5  counties  of  the  State  were  represented,  the  value  of  the  lands  of  these  farmers 
was  estimated  to  be  $5,507,036,  and  the  assessment  of  the  same  property  in  1899 
was  $2,109,927,  being  an  average  ratio  of  assessment  to  actual  value  of  38  per 
cent.  A  smaller  number,  954,  representing  64  counties,  made  a  statement  of  the 
gross  earnings  of  their  farms  and  the  amount  of  taxes  paid  upon  the  assessments 
of  1899,  showing  gross  earnings  $871,351  and  taxes  $37,297,  or  about  4.2  per  cent 
of  gross  receipts. 

Six  hundred  and  fifty-six  farmers,  representing  58  counties,  gave  their  gross 
income  as  $687,469,  and  income  less  expenses  $204,152,  the  ratio  of  gross  expenses 
to  gross  income  being  70.3  per  cent.  The  taxes  paid  by  these  656  farmers  averaged 
13  per  cent  of  their  income  from  operation  or  net  income.  Of  the  592  farmers 
who  reported  their  assessments  on  the  value  of  land,  implements,  and  live  stock, 


TAXATION    IN    WISCONSIN.  151 

the  average  ratio  of  assessment  to  actual  value  was  the  same  as  in  the  case  of 
land,  38  per  cent,  the  ratio  of  assessment  to  actual  value  in  case  of  implements 
being  23.7  per  cent,  and  in  case  of  live  stock  45.2  per  cent.  Reduced  to  brief  form 
these  results  are  as  follows: 

Per  cent. 

Ratio  of  assessed  to  true  value  of  land 38 

Ratio  of  assessed  to  actual  value  of  implements  ... 28. 7 

Ratio  of  assessed  to  true  value  of  live  stock 45. 2 

Percentage  of  gross  earnings  paid  in  taxes _     4. 2 

Percentage  of  income  from  operation  paid  in  taxes  - 13 

Ratio  which  assessed  value  of  farm  implements  bears  to  total  assessment  of 

farmer 3. 46 

Ratio  which  assessed  value  of  live  stock  bears  to  real  estate  of  farmers 17.4 

While  these  returns  are  crude  and  uncertain  as  compared  with  the  returns  of 
manufacturers  and  kindred  industries,  the  commission  expressed  the  belief  that 
even  on  so  limited  a  scale  they  indicate  in  some  degree  the  actual  conditions. 

After  all  is  said,  however,  the  comparison  of  this  farm  property  upon  this  basis 
with  that  of  manufacturing  plants,  railroads,  and  kindred  business  properties 
must  be  regarded  as  in  a  very  great  degree  guesswork  against  comparative  accu- 
racy, although  for  popular  use  not  de\:oid  of  substantial  value. 

A  similar  inquiry  among  manufacturers  showed  the  average  assessed  value  to 
be  37.2  per  cent  of  the  actual  value  in  1900.  The  results  of  inquiries  concerning 
this  class  of  properties  were,  however,  admitted  to  be  very  meager  and  unsatis- 
factory. 

The  representatives  of  the  railroad  companies  of  the  State  who  were  invited  to 
appear  before  the  commission,  in  presenting  their  views  of  the  relative  burdens 
of  taxation  on  different  classes  of  property,  presented  statistics  of  data  collected 
by  them  in  16  of  the  70  counties,  showing  the  average  ratio  of  assessed  to  true 
value  of  real  and  personal  property  of  all  classes  to  be  35.5  per  cent,  or  as  they 
claimed  about  one-third. 

A  somewhat  similar  inquiry  by  the  commission  as  to  business  and  residence 
property  showed  the  assessed  valuation  to  be  57.5  per  cent  of  the  actual  value,  and 
that  the  business  property  reported  upon  pays  taxes  to  the  amount  of  18  per  cent 
of  gross  income  and  24  per  cent  of  net  income. 

PERSONAL  PROPERTY. 

The  ratio  of  the  assessed  value  of  personal  property  in  the  State,  exclusive  of 
railroad  property,  to  the  assessed  value  of  real  and  personal  property  was  19.62  per 
cent,  based  upon  the  assessors'  returns  for  1898.  Referring  to  the  personal  prop- 
erty, especially  that  of  an  intangible  character,  which  escapes  the  tax  rolls,  the 
commissioners  say  that  in  the  practical  administration  of  tax  laws  it  is  apparent 
that  calculations  must  be  confined  to  that  actually  finding  a  place  upon  the  rolls. 
"  Speculation  as  to  how  much  escapes  will  not  make  up  the  deficiency,  nor  can  it 
be  contended  that  the  evasion  is  ground  for  lessening  the  just  burdens  on  prop- 
erty that  can  be  reached."  They  come  to  the  conclusion  that  the  ratio  of  assessed 
to  real  value  of  personalty  on  the  rolls  is  substantially  the  same  as  in  the  case  of 
real  estate,  35.5  per  cent. 

A  like  inquiry  as  to  the  value  of  merchants'  stocks  shows  the  assessed  value  to 
be  45.5  per  cent  of  the  actual  values,  although  it  is  admitted  that  the  actual  values 
given  are,  to  some  extent  at  least,  the  mere  opinions  01  merchants,  and  that  the 
difference  may  be  less  than  indicated. 

These  methods,  based  upon  mere  opinions,  are  estimates  of  owners,  and  render 
results  of  very  doubtful  value  and  reliability  as  a  basis  for  taxation  as  compared 
with  the  values  of  classes  of  property  obtained  through  more  accurate  and  com- 
prehensive methods  based  upon  more  certain  principles  and  elements. 

It  is  shown  that  the  banking  capital  of  the  State  is  assessed  at  77.7  per  cent  of 
the  actual  value  of  the  paid-up  stock,  at  63.1  per  cent  of  the  actual  value  of  the 
paid-up  stock  and  surplus,  and  58  per  cent  of  the  actual  value  of  paid-up  stock, 
surplus,  and  undivided  profits  combined. 

The  report  also  contains  an  interesting  account  of  a  laborious  and  painstaking 
effort  to  ascertain  the  value  of  the  properties  of  quasi-public  corporations  of  the 
State,  for  the  purpose  of  comparing  the  burden  of  taxation  thereon  under  the  license 
system  with  that  on  property  of  other  kinds  under  the  general  property  tax,  and  of 
determining  whether  it  is  advisable  to  readjust  the  existing  system,  or  change  to 
the  assessment  of  the  property  of  corporations  upon  an  ad  valorem  basis,  with  a 
view  to  taxing  it  upon  an  approximately  equal  basis  with  other  property. 


152  INDUSTRIAL    COMMISSION. 

With  this  end  in  view,  a  hearing  was  given  to  the  counsel  and  representatives  of 
the  railway  companies  operating  within  the  State  and  an.  opportunity  afforded 
for  the  presentation  of  their  views  of  the  questions  involved,  viz:  Whether  the 
present  system  of  license  fees  on  gross  earnings  should  be  abolished  and  railroad 

Property  valued  and  assessed  by  the  ad  valorem  system  or  general  property  tax. 
f  the  ad  valorem  method  is  adopted,  what  mode  should  be  prescribed  for  the 
ascertaining  of  the  value  of  such  property  and  the  proportion  it  bears  to  the 
value  of  other  taxable  property  in  the  State?  If  the  license  system  is  retained, 
what  mode  should  be  adopted  to  determine  the  percentage  of  gross  earnings  to  be 
paid  which  would  make  the  tax  paid  equal  to  the  taxation  imposed  upon  other 
property? 

There  was  shown  to  be  substantial  agreement  between  counsel  for  the  com- 
panies represented  upon  the  following  propositions: 

1.  That  the  license-fee  system  is  certain,  simple,  inexpensive,  self -executing,  and 
affords  a  fairly  reasonable  method  of  determining  the  relative  tax  obligations  of 
the  different  railway  properties. 

2.  That  the  local  assessment  of  railroad  property  by  men  unfamiliar  with  such 
property  is  expensive,  impracticable  if  not  impossible,  and  works  satisfactorily 
neither  to  the  public  nor  to  the  railway  companies. 

3.  That  in  case  the  ad  valorem  basis  is  adopted  for  the  taxation  of  railroad 
property,  the  valuation  shall  be  made  by  a  central  authority. 

4.  That  under  the  existing  license-fee  system  the  railroads  are  now  paying  their 
just  and  full  share  of  taxes  or  more. 

The  commission  early  in  its  investigation  reached  the  conclusion  that  the  old 
method  of  local  taxation  of  railroads  should  not  be  restored,  and  eliminated  it 
from  consideration.  It  then  proceeded  to  consider  the  ad  valorem  system  admin- 
istered by  a  State  board  and  the  license  or  earnings  system,  and  concluded  that 
taxation  by  either  method  should  be  imposed  upon  the*  entire  property  of  the  cor- 
poration according  to  value  or  earning  capacity,  and  that  no  division  of  the  elements 
constituting  the  unit  of  value  or  ability  to  pay  should  be  permitted. 

In  considering  the  ad  valorem  method,  the  fact  was  recognized  that  the  "  valua- 
tion of  railroad  property  at  full  value  and  other  kinds  at  one-half  value  or  less, 
when  the  same  rate  of  taxation  is  laid  on  both,  is  so  grossly  inequitable  and 
unjust  that  the  constant  effort  and  inclination  will  be  to  bring  the  former  down 
to  the  common  level,  or  supposed  equality." 

It  seems  to  be  further  assumed  that  the  leveling  process  must,  to  a  greater  or 
less  extent,  depend  upon  the  discretion  of  the  assessing  body,  and  that  if  complete 
and  accurate  statistics  of  the  true  value  of  all  classes  of  property  in  the  State  were 
obtained  and  the  board  "  comprised  of  able,  experienced,  and  skillful  members  of 
approved  integrity,  holding  a  continued  tenure  of  office,"  the  valuation  of  such 
property  might  be  held  in  proper  relation  to  other  classes  of  property  and  the 
valuation  and  taxation  made  with  approximate  justice  and  equity,  thus  clearly 
indicating  the  inherent  difficulty  and  weakness  of  the  ad-valorem  system  as 
applied  to  this  class  of  property.  This  result,  says  the  commission,  would  have 
the  advantage  of  preventing  fluctuation  in  the  revenue  in  times  of  depression  or 
prosperity,  which  is  one  of  the  objections  urged  against  the  earnings  system. 

Recognizing  the  obvious  advantages  of  the  earnings  tax,  the  commission  says 
it  has  been  so  long  established  in  the  State  that  a  change  should  not  be  made 
unless  a  better  substitute  is  shown. 

The  distinguishing  defects  in  the  earnings  tax,  such  as  fluctuation  in  earnings 
and  taxes,  its  relation  to  expenditures,  and  the  validity  of  such  a  tax  on  interstate 
earnings,  are  discussed  with  clearness  and  intelligence. 

The  commission  industriously  attempted  to  discover  some  reliable  method  for 
ascertaining  the  actual  value  of  railroad  property  in  the  State,  which  was  deemed 
essential  to  the  j  ust  and  adequate  taxation  of  such  property  under  the  ad  valorem 
system,  or  to  determine  the  rates  to  be  fixed  upon  gross  earnings  to  make  the  tax 
proportional  to  the  tax  imposed  upon  other  property. 

It  is  declared  that  the  argument  of  railroad  counsel  failed  to  point  out  any 
practical  method  for  a  reliable  valuation.  Several  methods  were  suggested  by 
railroad  counsel,  none  of  which  were  admitted  to  be  even  approximately  correct, 
while  one  went  so  far  as  to  contend  that  there  is  no  criterion  for  the  valuation  of 
railroad  property  that  can  be  absolutely  relied  upon. 

The  conclusion  of  all  these  arguments  was  that  there  is  no  mode  of  determining 
the  value  of  railroad  property  which  can  be  relied  upon.  It  was  contended  that 
when  terminals  and  facilities  of  great  value  at  railroad  centers,  connections, 
contracts,  and  traffic  arrangements  with  other  railroads  enter  into  the  calcula- 
tion, the  value  of  through  lines  presented  a  problem  so  complex  as  to  be  incapable 
of  solution  by  any  method,  investigation,  research,  or  exercise  of  human  judgment. 


TAXATION    IN    WISCONSIN.  153 

The  commission,  however,  concluded  that  whatever  the  difficulties,  it  was  not 
wise  to  delay  an  honest  attempt  to  find  the  value  of  such  properties  by  the  best 
possible  test.  It  expressed  the  belief  that  the  distribution  of  the  value  of  such 
property  between  the  States  according  to  mileage  in  each  State  is  the  only  prac- 
tical method  and  as  nearly  accurate  as  any  that  could  be  devised. 

In  the  adoption  of  a  method  for  determining  the  value  of  this  class  of  property, 
the  commission  rejected  as  unduly  expensive  the  employment  of  experts  to 
determine  the  physical  value  of  the  railroads — a  method  employed  by  the  Michigan 
tax  commission  during  the  past  year  with  results  of  very  questionable  worth, 
even  for  the  purpose  of  comparison  in  taxation.  Two  principal  sources  of  evi- 
dence were  obtainable,  the  first  being  the  reports  of  railroads  containing  accounts 
of  the  cost  of  the  roads  and  equipment,  issues  of  stocks  and  funded  debts,  gross 
and  net  earnings,  operating  expenses,  interest  and  dividends  paid,  etc.;  the  second 
being  to  take  the  market  price  of  the  capital  stock  and  funded  debt  of  each  road 
for  a  certain  period  and  find  the  value  by  the  aggregate  value  of  all  the  stocks 
and  bonds. 

The  average  market  value  of  the  stock  and  bonds  was  compiled  from  the  best 
and  most  reliable  sources  obtainable  for  periods  of  1,3,  and  5  years,  and  the  value 
of  railroad  property  in  Wisconsin,  determined  by  the  mileage  plan. 

The  market  values  ascertained  by  this  method  were  as  follows: 

Five-year  average '. $217, 995, 718 

Three-year  average 231,350,451 

One-year  average 252, 318, 776 

Taking  the  aggregate  value  of  all  the  taxable  real  and  personal  property  of  the 
State  as  ascertained  by  the  methods  hereinbefore  set  forth  and  the  total  taxes 
raised  for  the  year  1899,  the  tax  rate  upon  that  valuation,  it  was  found,  would  have 
been  1.1545  per  cent.  For  the  purpose  of  comparsion  of  the  taxes  paid  by  the 
owners  of  real  and  personal  property  with  that  which  would  fall  on  railroads 
on  the  ad  valorem  basis,  the  commission  took  the  average  market  price  of  the 
capital  stock  and  debt  for  the  5-year  period.  It  was  then  shown  that,  extending 
this  illustrative  tax  upon  that  basis,  the  amount  of  tax  would  be  $2,516,760.56. 
Based  upon  the  3-year  average  and  the  1-year  average,  the  tax  would  of  course  be 
correspondingly  higher. 

It  was  further  shown  that  if,  instead  of  using  the  average  rate  referred  to,  the 
aggregate  value  of  real  and  personal  property  was  added  to  the  aggregate  value 
of  the  railroads  on  the  5-year  basis,  and  the  amount  of  taxes  raised  from  both 
classes  in  1899,  the  general  taxes  and  the  license  taxes,  the  rate  would  be  1.102, 
and  the  amount  paid  by  the  railroads  at  that  rate  would  have  been  $2,402,312.81. 

The  commission  also  took  into  consideration  the  fact  that  "  a  too  radical  change 
might  affect  the  value  of  the  roads  and  cause  the  rates  charged  for  traffic  to  be 
increased.''  From  these  ingenious  investigations  and  comparisons  the  commis- 
sion concluded  that  it  would  not  be  wise  to  change  the  existing  license-fee  system 
until  it  was  more  thoroughly  tested,  after  so  fixing  the  rates  that  the  tax  on  gross 
earnings  would  be  placed  upon  a  basis  equitable  in  comparison  with  the  tax  on 
other  property. 

This  general  conclusion  would  appear  to  be  much  safer  and  sounder  than  the 
methods  employed  in  the  comparisons.  In  fact,  these  methods  illustrate,  as  stated 
by  the  New  Jersey  commission,  "how  impracticable  it  is  to  compare  two  things 
which  are  essentially  dissimilar;  how  difficult  and  unsatisfactory  it  is  to  make  a 
correct  and  just  comparison  of  two  systems  of  taxation  based  upon  dissimilar 
principles."  Such  comparisons  are  perhaps  useful  for  general  purposes,  but 
obviously  constitute  an  unsound  basis  for  tax  legislation.  The  principles  upon 
which  the  respective  methods  are  based  must  be  the  primary  consideration,  and 
the  comparative  valuation  thus  obtained  secondary. 

In  pursuing  these  methods  of  comparison  of  the  accurate  maximum  values  of 
one  class  of  property,  including  the  elements,  tangible  and  intangible,  which  go 
to  make  up  earning  capacity,  with  other  classes  of  property  based  upon  property 
estimate  and  conjecture,  it  is  obvious  that  liberal  allowance  must  be  made 
through  the  judgment  and  discretion  of  those  conducting  the  comparisons,  and 
that  numerous  elements  of  doubt  and  uncertainty  are  likely  to  be  determined  in 
favor  of  classes  coming  under  the  general  property  tax.  A  reliable  authority  has 
stated,  in  substance,  that  the  method  of  arriving  at  values  by  capitalizing  earn- 
ings at  a  certain  percentage  (or  by  market  value  of  bonds  and  stock)  must  be 
regarded  as  entirely  distinct  from  the  property  or  valuation  method,  and  for  all 
practical  purposes  amounts  to  a  tax  upon  earnings. 

The  application  to  one  class  of  property,  peculiar  and  complex  in  character,  of 
a  method  of  valuation  which  includes  not  only  tangible  property  values,  but  such 


154  INDUSTRIAL    COMMISSION. 

intangible  elements  as  franchises,  terminal  connections,  traffic  arrangements, 
business  management,  etc.,  and  to  other  classes  the  methods  employed  by  the 
assessors  for  ascertaining  values  of  real  and  personal  property  in  general,  can 
hardly  be  regarded  by  business  and  industrial  interests  as  affording  an  approx- 
imately reliable  basis  of  comparison  or  as  calculated  to  deduce  sound  and  logical 
conclusions.  The  soundness  and  justice  of  the  conclusions  reached  necessarily 
depend  very  largely  upon  the  good  judgment  of  the  commissioners. 

»  Valuations  were  also  placed  upon  the  properties  of  street  railways,  telegraph 
companies,  and  telephone  companies  by  somewhat  similar  methods  for  like  pur- 
poses of  comparison. 

RECOMMENDATIONS  OF  THE  COMMISSION. 

In  making  recommendations  the  commissioners  "have  sought  to  be  conserva- 
tive, keeping  in  mind,  while  seeking  remedies  for  the  evils  laid  bare,  that  too 
radical  an  effort  to  bring  relief  might  tend  to  neutralize  the  good  which  would 
follow  upon  an  immediate  equalization  of  the  tax  burden." 

The  conclusions  of  the  commission  may  justly  be  regarded  as  more  sound  than 
the  methods  employed  for  comparison  of  property  values  and  as  reflecting  great 
credit  upon  the  judgment  and  discretion  of  the  commission.  They  recommend  as 
follows: 

MAINTAIN  LICENSE-FEE  SYSTEM. 

That  the  license-fee  system  of  collecting  taxes  from  certain  corporations  be 
maintained,  at  least  until  it  be  given  a  test  under  conditions  that  will  make  the 
returns  received  from  it  more  nearly  equal  to  what  would  be  collected  from  the 
same  properties  on  an  ad  valorem  basis. 

LICENSE   FEE   TO  BE   COLLECTED   FROM   RAILROADS. 

That  the  annual  license  fee  to  be  paid  by  the  railroads  in  lieu  of  all  other  taxes 
shall  be  a  percentage  of  the  annual  gross  earnings  graded  from  a  minimum  of  3 
per  cent  to  a  maximum  of  5-J  per  cent,  the  graduation  and  classification  to  be  as 
follows: 

Three  per  cent  of  the  gross  earnings  of  all  railroads  whose  gross  earnings  do  not 
exceed  $2,000  per  mile;  the  rate  thereafter  to  be  increased  from  the  minimum  of 
3  per  cent  by  adding  thereto  one-tenth  of  1  per  cent  for  each  $100  of  gross  earn- 
ings per  mile  until  the  gross  earnings  per  mile  shall  equal  $4,500  and  the  maxi- 
mum rate  of  5i  per  cent  is  reached;  and  5|  per  cent  of  the  gross  earnings  of  all 
railroads  whose  gross  earnings  per  mile  are  $4,500  and  over.  Thus,  railroads 
whose  gross  earnings  are  equal  to  $3,000  per  mile  will  pay  4  per  cent;  $4,000  per 
mile,  5  per  cent;  $4,500  per  mile,  or  over,  5£  per  cent. 

The  railroads  in  1900  on  the  earnings  of  1899  paid  the  sum  of  $1,546,720.68  on 
gross  earnings  of  $39,487,403.67.  The  above  classification  on  the  per  cent  of  the 
gross  earnings  if  applied  to  the  gross  earnings  of  the  railroads  in  1899  will  give  a 
revenue  of  approximately  $2,150,000. 


SHALL  NOT   BE   A  WAIVER. 

That  the  payment  of  a  license  fee  on  the  gross  earnings  reported  to  the  State 
treasurer  by  the  railroads,  and  the  granting  of  a  license  to  operate  the  railroad  in 
the  State  shall  not  be  a  waiver  of  the  right  to  recover  such  further  sum  as  inves- 
tigation may  show  ought  to  have  been  paid. 

REASSESSMENT. 

That  in  case  the  taxation  of  railroads  under  the  license  fee  system  shall  be 
held  invalid  on  grounds  not  affecting  the  justice  or  equity  of  the  tax  a  State 
board  shall  be  designated  and  empowered  to  reassess  the  amount  of  the  license 
fee  which  should  have  been  paid  upon  the  property  of  the  railroad  corporations 
at  the  actual  value,  and  to  levy  a  tax  thereon  for  the  use  of  the  State. 

STREET  RAILWAYS  AND   ELECTRIC   LIGHTING   AND  POWER  COMPANIES. 

That  the  annual  license  fee  charged  the  above-named  companies  shall  be  a  per- 
centage of  the  gross  receipts  ranging  from  a  minimum  of  3  per  cent  to  a  maxi- 
mum of  5  per  cent,  graded  and  classified  as  follows:  Three  per  cent  of  the  annual 
gross  receipts  of  all  companies  whose  earnings  per  annum  shall  not  exceed $25, 000; 


TAXATION    IN    WISCONSIN.  155 

and  thereafter  to  be  increased  from  the  minimum  rate  of  3  per  cent  by  adding 
thereto  one-tenth  of  1  per  cent  for  each  additional  $7,500  of  gross  receipts  over 
$25,000  until  gross  receipts  of  $100.000  are  reached,  when  the  rate  will  be  4  per 
cent;  and  increased  from  4  per  cent  by  adding  thereto  one-tenth  of  1  per  cent  for 
each  additional  $10,000  of  gross  receipts  over  $100,000  until  annual  gross  receipts 
of  $200,000  are  reached,  when  the  rate  will  be  5  per  cent;  then  5  per  cent  on  the 
gross  receipts  of  such  companies  whose  gross  receipts  per  annum  shall  exceed 
$200,000. 

TELEPHONE   COMPANIES. 

That  the  annual  license  fee  which  shall  be  charged  telephone  companies  shall 
be  a  percentage  of  the  gross  receipts,  ranging  from  a  minimum  of  3  per  cent  to  a 
maximum  of  5  per  cent,  graded  and  classified  as  follows:  Three  per  cent  on  the 
gross  receipts  of  all  telephone  companies  whose  gross  receipts  per  annum  shall  not 
exceed  $25,000;  the  rate  thereafter  to  be  increased  from  the  minimum  rate  of  3 
per  cent  by  adding  thereto  one-tenth  of  1  per  cent  for  each  additional  $7,500  of 
gross  receipts  over  $25,000  until  gross  receipts  of  $100,000  are  reached,  when  the 
rate  will  be  4  per  cent;  thereafter  to  be  increased  from  4  per  cent  by  adding 
thereto  one-tenth  of  1  per  cent  for  each  additional  $10,000  of  gross  receipts  over 
$100,000  until  $200.000  of  gross  receipts  are  reached,  when  the  rate  will  be  5  per 
cent;  then  5  per  cent  qn  the  gross  receipts  of  such  companies  whose  gross  receipts 
per  annum  shall  exceed  $200,000. 

TELEGRAPH   COMPANIES. 

That  telegraph  companies  operating  in  the  State  be  taxed  on  the  ad  valorem 
basis,  the  assessment  to  be  made  by  a  State  board  the  same  as  in  the  case  of  sleep- 
ing car,  express,  freight  line,  and  equipment  companies. 

EXPRESS   COMPANIES. 

That  Chapter  III,  laws  1899,  be  changed  so  as  to  more  specifically  define  the 
property  to  be  deducted  in  making  the  assessment  of  express  companies.  The 
companies  have  made  the  claim  that  the  property  "  not  used  in  the  business  of 
such  express  company  "  should  be  deducted  before  making  the  assessment  of  their 
property.  It  was  contended  in  the  hearings  before  the  State  board  of  assessment 
that  a  large  amount  of  personal  property,  consisting  of  stocks,  bonds,  mortgages, 
and  other  securities  constituting  the  capital  of  the  companies  was  not  used  in  the 
express  business.  While  such  property  is  not  actually  used  in  the  transportation 
business  of  the  companies,  it  gives  strength  and  credit,  which  enable  them  to  do 
a  large  amount  of  business.  The  State  board  of  assessment  being  in  doubt  as  to 
the  right  to  include  such  property  in  the  valuation  of  the  express  companies,  have 
allowed  such  deduction  in  view  of  the  indefinite  provisions  of  the  statute. 

FOREIGN  CORPORATIONS. 

That  the  statutes  prescribing  the  conditions  upon  which  foreign  corporations 
are  permitted  to  transact  business  in  this  State  be  amended  in  important  particu- 
lars to  secure  their  better  regulation,  control,  and  taxation.  Such  corporations 
should  at  least  be  compelled  to  file  their  charters  or  articles  of  incorporation  and 
pay  the  same  fees  as  are  required  of  domestic  corporations.  They  should  also 
make  reports  of  the  capital  employed  within  the  State,  and  such  other  informa- 
tion as  may  be  demanded.  A  reasonable  license  fee  should  be  imposed  on  such 
corporations  for  the  privilege  of  exercising  the  corporate  powers  and  franchises 
in  carrying  on  their  business  within  the  State. 

INHERITANCE   OR  SUCCESSION   TAX. 

That  a  change  be  made  in  chapter  355,  laws  of  1899,  which  provides  for  a  tax  on 
inheritances  or  transfers  of  personal  property.  This  is  generally  commended  as 
a  just  and  wise  measure,  and  reaches  for  taxation  a  large  volume  of  intangible 
property  which  would  otherwise  escape.  The  act,  however,  has  two  provisions 
which  exempt  certain  property  that  ought  to  pay  the  inheritance  tax.  The  first 
is  that  part  of  section  11  which  reads  as  follows: 

'•  There  shall  be  deducted  from  such  valuation  an  amount  equal  to  the  fair 
valuation  of  all  personal  property  over  and  above  $10,000  upon  which  the  testator, 
intestate,  grantor,  vendor,  bargainer,  or  donor  has  paid  the  previous  year  a  per- 
sonal property  tax." 


156  INDUSTEIAL    COMMISSION. 

This  provision  should  be  stricken  out.  The  other  provision  which  should  also 
be  stricken  out  is  the  last  clause  of  section  19.  which  reads  as  follows: 

"In  case  of  any  transfer  of  any  shares  of  the  capital  stock  of  any  corporation 
which  owns  real  estate,  the  proportionate  market  value  of  its  real  estate  taxed  as 
such  shall  be  deducted  from  the  appraised  value  of  any  such  shares  so  transferred 
and  taxed  as  herein  provided." 

The  real  estate  of  the  corporation,  the  proportionate  value  of  which  is  to  be 
deducted  from  the  appraised  value  of  the  capital  stock,  may  be  situated  in  this  or 
other  States,  so  that  the  clause  as  it  now  stands  will  result  in  the  exemption  of 
capital  stock  to  a  large  extent  from  the  payment  of  the  inheritance  tax,  as  nearly 
every  corporation  owns  more  or  less  real  estate.  The  increasing  volume  of  this 
species  of  intangible  property  now  escaping  ordinary  taxation  should  at  least  be 
subject  to  the  inheritance  tax.  Section  13  of  the  law  conferring  jurisdiction  upon 
the  county  court  to  determine  the  cash  value  of  the  estate,  without  appointing 
appraisers,  should  be  amended  so  as  to  provide  for  notice  of  the  time  and  place  of 
hearing,  which  is  essential  to  the  validity  of  the  proceedings. 


IOWA. 

In  this  State  considerable  effort  of  a  conservative  character  has  been  made 
during  recent  years  to  improve  the  crude  and  inadequate  general  property  tax 
system  adopted  in  an  early  day,  before  corporate  property  had  assumed  any  con- 
siderable proportions.  The  progress  of  reform  in  the  taxation  of  property  in 
corporate  and  intangible  forms  and  the  adoption  of  more  modern  methods  has, 
however,  apparently  been  impeded  by  the  ambiguous  constitutional  provision 
that  "the  property  of  all  corporations  for  pecuniary  profit  shall  be  subject  to 
taxation  the  same  as  that  of  individuals;  "  by  the  tenacity  with  which  public  senti- 
ment of  the  State  clings  to  the  idea  of  taxing  such  forms  in  "  the  same  manner, 
to  the  same  extent,  at  the  same  rates,  and  for  the  same  purposes  "  as  the  property 
of  individuals,  and  the  apparent  reluctance  to  supplement  the  general  property 
tax  by  the  adoption  of  entirely  separate  and  distinctive  methods  for  the  taxation 
of  special  classes  of  corporate  property  by  uniform  State  assessments.  Consid- 
erable progress  has,  however,  been  made  since  the  report  of  the  tax  commission 
in  1893  by  the  revision  of  the  tax  code  in  1897,  and  the  good  effects  of  changes 
already  made  will  doubtless  be  conducive  to  still  greater  progress  in  that  direction. 

The  report  of  the  tax  commission  referred  to  is  a  contribution  to  the  literature 
of  taxation  in  American  States  lacking  in  positive  force  and  virility.  It  was  the 
avowed  "  aim  of  the  commission,  next  to  bringing  about  a  readjustment  of  the 
burdens  of  taxation,  to  see  that  these  burdens  were  not  increased."  It  expresses 
the  firm  belief  that  the  bill  proposed  by  it,  if  placed  upon  the  statute  book, 
would  accomplish  both  these  reforms;  that  it  would  even  "have  a  tendency 
actually  to  lessen  the  public  burdens  as  to  those  who  now  pay  taxes." 

Thus  prepared,  "  the  measure  is  submitted  for  the  critical  consideration  of  the 
people  who  must  furnish  the  revenues  of  the  State  and  the  counties,  and  to  whom 
these  revenues  belong  for  disbursement."  As  an  educational  source  regarding 
just,  uniform,  and  progressive  taxation,  to  the  people  who  must  "furnish  the 
revenues,"  it  falls  short.  The  commission  seems  to  follow  rather  than  lead  public 
sentiment. 

Still  it  would  hardly  be  charitable  to  conclude  that  the  commissioners  proceeded 
upon  the  assumption  of  the  adequacy  of  the  existing  system  of  taxation  in  that 
State .  Rather  should  it  be  inferred ,  from  the  fact  that  only  a  portion  of  the  changes 
recommended  were  followed  by  the  legislature  in  the  revision  of  the  tax  code  in 
1897,  that  they  sought  what  was  then  attainable  in  legislation  rather  than  the 
framing  of  correct  scientific  methods  and  theories  of  taxation.  Some  deficien- 
cies in  the  existing  methods  and  in  administration  are  mildly  set  forth,  but  no 
positive  or  radical  changes  in  methods  are  recommended,  the  commissioners  appar- 
ently confining  themselves  to  the  better  enforcement  of  the  prevailing  general 
property  tax  and  its  adaptation  to  changing  economical  conditions. 

They,  advert  to  the  fact  that  corporations  are  multiplying  out  of  all  proportion 
to  the  increase  of  population;  that  statutory  provisions  for  taxing  corporations 
in  general  remain  practically  unchanged  since  the  time  when  there  were  very 
few  of  them  in  the  State,  and  are  so  unsatisfactory  that  assessors  in  many 
cases  pay  little  or  no  attention  to  their  listing;  yet  they  confine  themselves  to  the 
recommendation  of  a  corporation  organization  tax  and  aim  "to  render  the  man- 
ner of  listing  and  assessing  corporations  clear  and  unambiguous  and  so  as  to 
secure  from  them  contributions  to  the  public  revenue  proportioned  in  amount  to 
those  supplied  by  individuals." 

No  definite  recommendations  were  made  or  opinions  expressed  upon  the  ques- 
tion of  divorcement  of  the  sources  of  the  State  and  local  revenues,  any  opinion 
for  or  against  such  a  change  being  expressly  withheld,  the  bill  presented  simply 
containing  alternative  provisions  in. that  regard,  resulting  in  the  retention  of  the 
existing  method. 

The  recommendations  of  the  commission  in  respect  to  organization  tax, 
corporation  tax,  inheritance  tax,  and  other  suggestions  were  followed  in  part 
only  by  the  legislature  in  the  revision  of  the  code,  although  the  laws  were  con- 

157 


158  INDUSTRIAL    COMMISSION. 

siderably  altered  with  respect  to  assessment  of  corporations  generally.  Consid- 
erable change  was  made  in  the  listing  and  assessment  of  property  and  more 
stringent  methods  adopted,  which  are  expected  to  greatly  increase  the  valuation 
and  discovery  of  property  for  taxation. 

Little  need  be  said  with  respect  to  the  general  system  in  vogue  as  applied  to 
real  and  personal  property  in  general.  It  is  the  crude  general  property  tax  by  local 
assessment,  through  elective  local  officers,  for  local,  county,  and  apportioned  State 
taxes,  mingled  with  the  primitive  equalization  as  between  townships  by  county 
boards  of  review  and  among  counties  by  a  state  board  of  equalization. 

During  the  biennial  period  from  July  1, 1897,  to  June  30,  1899,  the  State  receipts 
from  county  levies  were  $4.055,767.75;  from  corporations,  viz,  insurance,  tele- 
phone, express,  and  telegraph,  $375.596.57;  the  remainder  of  State  revenues  being 
from  officers'  fees,  collateral  inheritances,  and  miscellaneous  sources. 

We  will  refer  in  detail  to  the  provisions  for  the  assessment  and  taxation  of 
various  classes  of  corporate  property. 

ASSESSMENT  OF  REAL  AND  PERSONAL  PROPERTY. 

The  executive  council,  or  State  board  of  review,  fix  the  ratfe  of  taxation  for 
State  revenues  upon  the  valuation  of  taxable  property  within  the  State,  the 
amount  to  be  expended  for  general  State  purposes  being  fixed  by  the  general 
assembly.  The  rates  for  ordinary  county  revenues,  support  of  schools  and  other 
local  purposes,  are  limited  by  statute.  The  amounts  required  within  these  limi- 
tations are  levied  by  the  board  of  supervisors  in  each  county  upon  the  assessed 
value  of  taxable  property  within  the  county.  The  exemptions  of  property  are 
liberal,  including  as  usual  property  for  public  and  charitable  purposes  as  well  as 
property  for  family  support  and  farms,  young  live  stock,  and  teams,  utensils,  and 
other  property  essential  to  livelihood. 

The  board  of  supervisors  constitutes  the  county  board  of  review,  and  adjusts 
the  assessments  of  the  several  townships,  cities,  and  towns,  and  the  State  execu- 
tive council  acts  as  a  State  board  of  review  for  the  adjustment  of  valuations  of 
the  several  counties. 

In  the  assessment  laws  it  is  especially  provided  that  all  property  subject  to  tax- 
ation shall  be  valued  at  its  actual  value,  meaning  its  value  in  the  market  in  the 
ordinary  course  of  trade,  and  assessed  for  taxation  at  25  per  cent  of  such  actual 
value,  the  purpose  of  this  unique  method  of  assessment  being  to  avoid  the  danger 
of  excessive  levies  upon  a  basis  of  full  valuation,  there  being  a  constitutional 
limitation  upon  the  power  to  create  municipal  indebtedness. 

The  real  and  personal  property  of  individuals  and  private  corporations  is  taxa- 
ble locally  for  both  State  and  local  purposes.  Aside  from  the  liberal  statutory 
exemptions,  it  is  designed  to  bring  all  kinds  of  property  upon  the  rolls  by  uni- 
form methods  and  rates,  and  to  accomplish  that  object  there  appears  to  be  con- 
siderable latitude  in  the  construction  of  the  term  "  double  taxation,"  the  evils  of 
that  injustice  being  apparently  regarded  as  preferable  to  the  escape  of  property 
from  single  taxation. 

For  the  purposes  of  taxation,  credits  are  expressly  defined  to  include  "every 
claim  or  demand  due  or  to  become  due  for  money,  labor,  or  other  valuable  thing; 
every  annuity  or  sum  of  money  receivable  at  stated  periods  and  all  money  or 
property  of  any  kind  secured  by  deed,  title,  mortgage,  bond,  or  otherwise,  and 
all  moneys  of  every  kind,  credits,  and  corporation  shares  or  stock  except  as 
otherwise  provided,  notes,  accounts,  contracts,  bills  of  exchange,  judgments, 
choses  in  action,  liens  of  any  kind,  and  securities  other  than  those  of  the  United 
States." 

It  has  been  held  that  the  taxation  of  a  mortgage  debt  in  the  hands  of  a  mort- 
gagee and  also  of  the  property  in  the  hands  of  the  mortgagor  does  not  constitute 
double  taxation,  and  that,  although  the  taxation  of  the  property  of  a  corporation 
to  the  corporation  and  the  shares  of  its  stock  to  the  holders  thereof  may  amount 
to  double  taxation,  it  is  not  unconstitutional. 

The  statute  provides  for  a  limited  and  conditional  deduction  of  debts  from  the 
amount  of  money  or  credits  listed  by  any  person,  being  limited  to  the  gross 
amount  of  all  debts  owing  in  good  faith  and  not  formed  with  a  view  to  decreasing 
taxation,  and  it  being  specifically  provided  that  no  person  shall  be  entitled  to  any 
deduction  on  account  of  any  indebtedness  contracted  for  the  purchase  of  non- 
taxable  property.  Deductions  for  debts  are  made  only  from  moneys  and  credits. 
The  bill  proposed  by  the  tax  commission  omitted  all  provisions  for  deduction  of 
indebtedness  of  any  kind,  from  the  amount  of  moneys  and  credits,  but  the  legis- 
lature did  not  follow  their  plan  in  this  respect. 


TAXATION    IN    IOWA.  159 

LISTING. 

An  attempt  is  made  to  secure  by  law  a  fair  and  equitable  listing  of  all  the  tax- 
able property  of  individuals  and  corporations,  the  values,  however,  being  fixed 
by  the  assessors.  The  local  assessor  is  required  to  list  and  assess  the  property  of 
each  taxpayer  with  his  assistance,  the  owner  being  required  to  list  his  property 
under  oath  subscribed  by  him  and  administered  by  the  assessor,  refusal  to  take 
which  is  declared  to  be  a  misdemeanor.  The  assessor  is  required  to  fix  the  value 
of  property  assessed,  and  at  the  time  it  is  made,  to  notify  the  owner  in  writing  of 
the  valuation  put  upon  his  property,  directing  him  to  appear  before  the  board 
of  review  and  show  why  the  assessment  should  be  changed  if  he  feels  aggrieved. 

In  case  any  person  refuses  to  list  property  the  assessor  assesses  it  according  to 
the  best  information  obtainable,  and  adds  to  the  taxable  valuation  100  per  cent. 
Any  person  who  knowingly  makes  a  false  statement  in  regard  to  his  taxable 
property  is  declared  guilty  of  perjury. 

Each  grain,  ice,  and  coal  dealer  is  assessable  upon  the  average  amount  of  capital 
used  by  him  in  conducting  his  business,  estimated  in  manner  provided. 

Provision  is  made  for  the  listing  and  assessment  of  stocks  of  merchandise  by 
inventory  at  the  average  value  of  such  stocks  during  the  preceding  year.  This 
applies  also  to  corporations  engaged  principally  in  mercantile  business,  such  taxa- 
tion being  in  lieu  of  any  tax  on  corporate  shares. 

The  property  of  manufacturers  which  enters  into  the  combination  or  manufac- 
ture of  products  is  listed  and  assessed  in  like  manner  with  merchandise  as  to 
average  value,  the  real  estate,  including  machinery,  being  separately  assessed. 
Corporations  engaged  in  manufacturing  are  required  to  list  their  real  estate,  per- 
sonal property,  moneys,  and  credits  in  like  manner  as  required  of  individuals, 
and  when  so  listed  and  assessed  the  shares  of  stock  of  such  corporations  are  exempt 
from  taxation  in  the  hands  of  their  owners. 

Personalty  is  listed  and  assessed  each  year,  and  real  estate  is  listed  and  valued 
in  each  odd-numbered  year,  buildings  erected  thereon  being  assessed  in  any  year. 

Although  Iowa  is  distinctively  an  agricultural  State  and  the  property  upon  the 
whole  less  complex  in  character  than  in  some  of  the  States  reported  upon,  the 
statutes  requiring  the  assessment  of  property  at  its  full  value  seem  to  have  been, 
under  former  methods  at  least,  universally  ignored.  This  condition  led  to  the 
appointment  in  1893  of  the  special  revenue  commission  to  examine  the  revenue 
laws  and  report  necessary  and  desirable  changes;  the  present  tax  code,  enacted  in 
1897,  following  in  many  respects  the  recommendations  of  that  commission.  The 
investigation  showed  at  that  time  that  realty  was  variously  assessed  at  from  17 
per  cent  to  60  per  cent  of  its  true  value,  averaging  38  per  cent;  that  personalty 
was  listed  at  about  36  per  cent,  a  sufficient  amount  of  personalty  escaping  alto- 
gether to  bring  the  latter  figure  down  to  20  per  cent.  This  commission,  in  the  con- 
sideration of  remedies  for  the  injustice  of  this  varied  undervaluation  of  property, 
unanimously  opposed  the  suggestion  of  a  proportionate  valuation,  as  a  rule  fraught 
with  evil  results  and  operating  in  practical  operation  against  the  man  of  small 
means.  It  is  claimed  that  under  the  provisions  of  the  new  code  conditions  as  to 
valuation  of  both  real  and  personal  property  have  improved,  and  that  under  the 
listing  systems  in  force  property  is  more  fully  and  adequately  valued  for  taxa- 
tion. Whether  this  belief  is  the  proverbial  result  of  the  "new  broom,"  or 
whether  the  change  will  result  in  permanent  improvement,  can  perhaps  be  hardly 
determined  at  this  time. 

MORTGAGES. 

Encumbered  real  estate  is  assessed  to  the  owner  at  its  taxable  value,  and  mort- 
gages are  assessed  as  personal  property  to  the  owners  thereof  at  their  taxable 
value.  It  has  been  held  by  the  courts  that  this  practice  does  not  constitute  double 
taxation. 

This  subject  received  special  consideration  by  the  tax  commission,  and  the  fol- 
lowing is  their  report  upon  and  discussion  of  the  subject: 

"  The  exemption  of  the  mortgaged  part  of  realty  from  the  assessment  of  such 
realty  to  the  holder  thereof  and  listing  the  value  of  such  mortgaged  part  to  the 
holder  of  the  security  was  among  the  first  suggestions  made  to  members  of  the 
commission .  The  disc  ussions  on  the  sub  j  ect  which  have  been  extensively  indulged 
in  for  many  years  past  had,  moreover,  attracted  their  attention  individually  long 
before  their  appointment.  Several  of  the  States  had  enacted  the  principle  into 
law,  and  one  (California)  had  made  it  a  part  of  the  constitution.  But  the  com- 
mission is  unanimous  in  the  opinion  that  to  adopt  the  measure  would  be  unwise 
and  illogical,  and,  moreover,  unsatisfactory  to  those  urging  the  change,  and  dam- 
aging to  the  interests  whose  benefit  is  contemplated  thereby.  Under  the  existing 


160  INDUSTEIAL    COMMISSION. 

law  all  realty  is  assessed  as  such.  The  commission  can  conceive  of  nothing  which 
will  improve  this  essentially  just  mode  of  taxation.  Realty  can  not  be  hidden, 
and  its  market  value  is  not  difficult  of  estimation.  Your  commission  can  not 
but  think  it  unwise  to  withdraw  any  part  of  it  from  the  tax  list  merely  because 
such  part  secures  an  indebtedness.  The  commission  is  not  unaware  of  the  fact 
that  the  measure  in  question  does  not  in  terms  contemplate  withdrawing  the 
property  mortgaged  from  taxation  and  that  it  proposes  that  taxation  shall  be 
b«rne  by  the  mortgagee  of  the  property.  So  far  as  existing  mortgages  are  con- 
cerned it  amounts  to  the  same  thing.  Where  such  mortgages  are  held  in  Iowa 
the  law  requires  the  securities  to  be  listed  for  taxation,  the  same  as  other  prop- 
erty, and  taxes  are  paid  thereon.  In  respect  of  obligations  held  in  other  States 
that  are  secured  by  such  mortgages,  they,  of  course,  can  not  be  reached  for  taxation 
by  any  enactment  made  subsequently  to  the  execution  of  such  obligations.  Such 
legislation  would  be  an  impairment  of  the  obligation  of  a  contract. 

"  The  effect,  therefore,  of  adopting  the  measure  proposed  would,  as  to  existing 
contracts,  be  simply  to  release  mortgaged  realty  to  the  extent  of  the  incumbrance 
from  all  taxation.  In  respect  of  contracts  made  after  the  adoption  of  such  a 
measure,  the  commission  is  of  the  opinion  that  the  fact  that  the  mortgagee  must 
pay  the  taxes  on  the  mortgaged  part  of  the  realty  would  havetthe  effect  of  com- 
pelling borrowers  to  pay  a  higher  rate  of  interest,  at  least  when  obtaining  money 
from  beyond  the  borders  of  the  State. 

"  The  relief  of  the  burdened  holders  of  property  is  the  ostensible  object  of  the 
measure.  This  relief,  if  any,  under  existing  contracts  would  be  entirely  at  the 
expense  of  the  public  revenues.  As  to  future  contracts,  it  would  be  substantially 
neutralized  by  increased  rates  of  interest. 

' '  The  man  who  loans  money  naturally  prefers  to  pay  his  taxes  where  he  resides 
and  where  he  more  directly  receives  the  benefit  of  its  payment  and  where  he  may 
have  some  voice  in  the  matter  of  taxes  imposed  upon  it.  All  other  things  being 
equal,  he  will  select  that  field  for  investment  which  gives  him  that  privilege,  and 
which  has  in  it  the  least  element  of  uncertainty.  It  is  sometimes  claimed  that  he 
does  not  pay  taxes  at  his  home  upon  the  investment.  The  commission  knows  of 
no  State  or  Territory  throughout  the  Republic  the  laws  of  which  do  not  contem- 
plate the  taxation  of  the  credits  held  by  its  people,  and  we  have  no  right  to  assume 
that  their  laws  are  not  complied  with.  Moreover,  whether  such  securities  are  or 
are  not  taxed  in  other  States,  the  commission  thinks  it  as  much  as  we  can  do  to 
reach  all  assessable  property  of  our  own  people  without  raising  questions  con- 
cerning the  taxation  of  those  in  other  States.  It  is  not  necessary  to  discuss  the 
question  as  to  the  State  to  which  the  lender  is  under  most  obligation,  that  where 
he  resides  and  has  perhaps  accumulated  his  money  or  that  which  temporarily 
affords  him  an  investment.  His  course  will  not  depend  upon  the  determination 
of  that  question.  He  is  the  sole  judge  as  to  whether  he  shall  send  his  money  to 
this  State  or  another,  and  the  greater  favorableness  of  the  conditions  will  deter- 
mine him.  Those  who  to-day  are  furnishing  our  people  the  cheapest  money  on 
their  farms  have  already  largely  inserted  clauses  in  their  mortgages  requiring  the 
borrower  to  pay  any  taxes  that  may  be  levied  upon  the  obligations  secured  by 
the  mortgages,  and  reserving  the  option,  in  the  event  of  the  assessment  of  such 
taxes,  to  declare  the  whole  amount  due  and  collectible  at  once. 

"  It  is  claimed  by  some  that  the  conditions  are  such  that  our  needs  in  this  direc- 
tion are  principally  supplied  by  citizens  and  corporations  of  pur  own  State.  This 
is  not  true.  Our  cheapest  money  comes  largely  from  the  insurance  companies 
and  savings  banks  of  New  England,  and  while  our  own  loan  and  trust  compa- 
nies may  be  the  owners,  as  appears  of  record,  yet  they  are  in  fact  held  by  Eastern 
investors  or  by  Eastern  trust  companies  to  secure  the  debenture  bonds  issued  by 
the  local  company.  One  Iowa  company,  in  its  recently  published  report,  shows 
a  larger  amount  in  outstanding  debenture  bonds  and  mortgages  than  is  embraced 
in  the  capital  of  all  the  banks  in  the  city  of  Des  Moines.  The  taxation  of  foreign 
mortgages  would  be  the  harvest  of  the  local  money  leaner  by  reason  of  advanced 
rates. 

"Again,  what  special  reason  is  there  why  the  foreign  holder  of  Iowa  mortgages 
should  be  taxed  and  the  farmer  exempted  more  than  the  wholesale  merchant  in 
the  East  should  be  taxed  for  the  amount  due  him  from  the  local  merchant,  and  a 
corresponding  exemption  made  to  such  local  merchant?  The  wholesale  merchant 
may  not  receive  interest  on  his  investment,  but  he  has  its  equivalent  in  the  profits 
on  its  sales.  If  this  rule  were  applied,  how  many  local  merchants  would  obtain 
a  credit  on  their  purchases  that  would  allow  them  to  carry  their  customers  to 
the  extent  now  possible?  Against  all  deductions  for  indebtedness  there  are 
other  reasons: 

"1.  The  landowner,  the  man  with  stock,  and  the  owner  of  fixed  permanent 
property,  which  would  include  as  well  corporation  stocks,  would  not  have  the 
opportunities  enjoyed  by  the  merchant,  the  broker,  the  dealer  in  grain  or 


TAXATION    IN    IOWA.  161 

stock,  or  the  speculator  or  dealer  in  any  of  those  commodities  which  are  readily 
exchangeable,  to  increase  or  shift  their  indebtedness  to  meet  the  visit  of  the 
assessor.  Merchants  could  order  their  supply  of  goods  for  six  months  or  a  year 
in  advance,  giving  their  notes  without  interest  therefor,  yet  using  due  care  that 
the  goods  should  not  be  in  stock  nor  in  transit  until  after  the  date  fixed  for 
assessment. 

'k  2.  It  would  open  the  door  to  the  creation  of  all  manner  of  contingent  if  not 
fictitious  indebtedness,  until  much  of  the  property  now  upon  the  tax  books  would 
have  taken  wings  in  pursuit  of  the  already  elusive  'moneys  and  credits'  of  the  cap- 
italist and  stock  of  the  farm,  which,  year  by  year,  is  thus  steadily  declining  in  its 
average  assessed  value. 

"  3.  Another  reason  is  that  the  man  doing  business  largely  upon  borrowed  capi- 
tal would,  if  allowed  to  deduct  his  indebtedness,  have  a  decided  advantage  in  the 
matter  of  taxation  over  his  competitor  doing  business  on  his  own  capital.  Thus 
the  tendency  would  be  to  multiply  indebtedness,  to  drive  out  of  the  State  the 
capital  even  of  the  business  man  where  the  assessor  could  not  find  it,  and  cause 
him  to  do  business  upon  his  credit,  backed,  possibly,  if  necessary,  by  his  untaxed 
investments  in  other  States  as  collateral.  If  this  is  regarded  as  fanciful,  it  may 
be  said  that  it  is  done  to  a  very  considerable  extent  by  shrewd  Eastern  business 
men,  and  is  made  a  matter  of  complaint  by  the  tax  authorities  of  other  States. 

"  The  commission  caused  inquiry  to  be  made  as  to  the  working  of  the  proposed 
measure  where  it  has  been  enacted  into  law,  and  especially  in  the  State  of  Cali- 
fornia, where,  as  stated  before,  it  is  a  constitutional  provision.  The  tenor  of 
advices  from  that  State  is  to  the  effect  that  borrowers  pay  the  taxes  on  mortgages 
through  enhanced  rates  of  interest.  Some  of  the  letters  say  that  both  borrowers 
and  lenders  are  satisfied  with  the  status,  the  former  because  their  assessments  are 
reduced,  the  latter  because  their  net  returns  from  the  investment  are  as  good 
(after  paying  the  taxes)  as  before  the  present  system  was  adopted.  Other  States 
which  have  adopted  the  measure  have  considerably  modified  it,  and  one  has  aban- 
doned it  entirely.  In  most  of  these  States  the  parties  have  directly  or  indirectly 
inserted  a  stipulation  that  the  borrower  shall  pay  the  taxes.  The  State  of  Oregon 
has  given  the  proposed  measure  a  very  thorough  trial.  In  1882  it  was  enacted 
into  law  in  that  State.  At  the  next  session  of  the  legislature,  however,  an  act 
was  passed  making  valid  all  contracts  by  which  the  borrower  agreed  to  pay  the 
tax  on  the  debt,  even  though  the  latter  bore  the  maximum  rate  of  interest  allowed 
by  law.  This  agreement  is  said  to  be  always  exacted;  as  may  be  well  believed, 
and  the  lender  paid  no  tax.  Finally,  after  10  years'  of  experience  with  the  law, 
the  legislature  of  Oregon,  at  the  instance  of  the  same  interests  which  had 
procured  its  passage  originally,  has  just  repealed  it,  and  adopted  the  plan  recom- 
mended in  this  bill,  of  prohibiting  any  deduction  whatever  on  account  of  indebt- 
edness.'' 

VALUATIONS. 

The  actual  value  of  land  in  1899  _ .  . . .  $1, 204, 932, 766 

The  actual  value  of  town  lots  in  1899  . .  373, 520, 290 


Actual  value  of  all  real  estate 1,578,453,056 

Exemptions..  12,077,733 

Total  ..  -  1,566,375,323 


Taxable  value  of  real  estate  (25  per  cent) 391 , 618, 831 

Actual  value  of  personalty 361,196,017 

Taxable  value  of  personalty. .  -  - 90,299,004 

Actual  value  of  vehicles,  1899 5, 326, 332 

Actual  value  of  household  goods,  1899 2, 418, 553 

Actual  value  of  moneys  and  credits 106, 682, 840 

Actual  value  of  corporation  stocks 22, 132, 498 

Actual  value  of  merchandise 59, 940, 418 

Actual  value  of  other  personalty _  _                                                    .  -  -  20 , 404, 40 

Personalty  other  than  live  stock -  -  -  216, 905, 047 

Actual  value  live  stock 144, 290, 970 

Actual  value  personalty 361, 196, 017 

State  tax,  1898. .                                                                1,788,175.63 

Total  State  and  local  taxes  ...  18, 807, 090. 93 

11 


162  INDUSTRIAL    COMMISSION. 

BANKS. 

Private  banks  or  bankers  are  required  to  furnish  to  the  local  assessor  a  sworn 
statement  of  the  amount  of  moneys,  the  actual  value  of  credits,  amount  of  deposits 
and  bills  payable,  the  actual  value  of  bonds  and  stocks,  and  all  other  property 
pertaining  to  their  business. 

.    Their  real  estate  is  specially  listed  and  valued  for  taxation  the  same  as  other 
real  estate. 

The  aggregate  actual  value  of  moneys  and  credits,  less  the  amounts  of  deposits 
and  debts  owing,  and  the  aggregate  actual  value  of  bonds  and  stocks,  except  such 
as  may  be  exempt  or  otherwise  taxed  in  this  State,  and  all  other  property  per- 
taining to  the  business,  is  assessed  locally  at  25  per  cent  of  its  actual  value. 

Shares  of  stock  of  National  banks  are  assessed  to  individual  stockholders  where 
the  bank  is  located,  the  officers  of  such  banks  being  required  to  furnish  the  assessor 
with  a  list  of  stockholders  and  the  number  of  shares  owned  by  each,  and  to  list  to 
each  stockholder  the  total  value1  of  his  shares. 

Shares  of  stock  of  State  and  savings  banks  and  loan  and  trust  companies  are 
assessed  to  such  banks  and  companies  and  not  to  the  individual  stockholders. 
To  aid  the  assessor  in  fixing  the  value  of  such  shares,  these  vaujous  corporations 
are  required  to  furnish  him  with  a  verified  statement  of  property,  similar  to  that 
required  of  private  banks,  together  with  surplus  earnings,  and  the  assessor,  from 
such  statement  and  such  other  information  as  he  may  obtain,  fixes  the  value  of 
the  stock,  taking  into  account  the  capital,  surplus,  and  undivided  earnings,  the 
real  estate  being  deducted  and  assessed  separately,  as  other  real  estate. 

The  fact  that  stock  in  a  National  bank  is  assessed  to  the  shareholder,  while  sav- 
ings banks  are  taxed  upon  capital  stock  and  the  shares  are  not  taxable  to  holders, 
does  not  render  the  tax  on  National-bank  stock  to  the  holders  illegal,  as  in  viola- 
tion of  the  Federal  statute,  providing  that  the  tax  on  such  stock  shall  be  no  higher 
than  that  imposed  on  other  moneyed  capital,  and  no  greater  than  on  the  other 
class  of  banks. 

It  has  been  held  that  the  holder  of  stock  in  National  banks  may  set-off  against 
it  indebtedness  owing  by  him,  based,  according  to  the  Iowa  statute,  on  actual 
consideration.  Whether  the  owner  of  shares  of  stock  in  a  State  bank  can  set-off 
debts  against  the  tax  on  such  stock,  taxed  directly  to  the  bank,  does  not  appear  to 
be  entirely  clear. 

This  class  of  property  is  taxed,  with  local  property  in  general,  at  local  rates,  and 
under  the  more  strict  provisions  for  obtaining  a  certain,  uniform,  full  valuation 
of  such  property  than  in  the  case  of  property  in  general  taxed  locally,  the  bur- 
den of  taxation  would  appear  to  be  correspondingly  greater. 

SHARES  OF  CORPORATION  STOCK. 

The  shares  of  stock  in  any  corporation  organized  under  the  laws  of  the  State 
for  pecuniary  profit,  except  as  otherwise  specially  provided  for,  are  assessable  to 
the  owners  thereof  at  the  place  where  its  principal  business  is  transacted,  the 
assessment  being  on  the  value  of  such  shares  on  the  1st  day  of  January  in  each 
year.  In  such  cases  the  amount  of  capital  in  real  estate  is  deducted  from  the 
Value  of  shares,  such  real  estate  being  assessed  as  other  real  estate,  and  the  prop- 
erty of  such  corporations,  except  real  estate  situate  within  the  State,  is  not  other- 
wise assessed.  Verified  annual  statements  are  required  to  be  furnished  to  the 
local  assessor,  showing  authorized  capital  stock  and  number  of  shares  thereof; 
number  of  shares  issued,  and  par  value  of  each;  amount  paid  into  the  treasury  on 
each  share,  and  the  total  capital  paid  in;  description  and  value  of  each  tract  of 
real  estate;  date,  rate  per  cent,  and  amount  of  each  dividend  declared  and  amount 
of  capital  on  which  it  was  declared;  gross  and  net  earnings,  respectively,  during 
thfc  year,  and  amount  of  surplus;  amount  of  profit  added  to  sinking  fund;  highest 
price  of  sales  of  stock  between  the  1st  and  10th  days  of  January  of  the  current 
year;  highest  sales  of  stock  during  the  preceding  year,  and  average  price  of  sales. 

The  assessor  has  the  power  to  fix,  arbitrarily,  the  value  of  such  shares  of  stock 
upon  the  facts  contained  in  the  statements  furnished  or  upon  any  information 
within  his  possession  or  that  may  come  to  him. 

All  such  corporations  are  liable  for  the  payment  of  taxes  so  assessed  to  share- 
holders, and  may  recover  taxes  paid  from  stockholders,  having  a  lien  therefor  upon 
the  stock  and  unpaid  dividends  enforceable  by  sale  of  the  stock. 

It  is  not  very  clear  just  what  kinds  of  property  are  in  practice  assessed  under 
these  provisions.  One  officer  says  in  regard  to  them, ' '  It  looks  as  if  the  legislature 
had  provided  a  way  to  assess  all  the  property  it  could  think  of  and  then  threw  in 
this  section  as  a  drag  net  to  catch  anything  that  might  be  found." 


IOWA    CORPORATION    TAXES.  163 

STOCK  OF  BUILDING  AND  LOAN  ASSOCIATIONS. 

Special  provision  is  made  for  the  assessment  and  taxation  of  this  class  of  prop- 
erty, the  shares  of  stock  in  such  associations  being  assessed  and  taxed  to' the 
individual  holders  thereof  at  their  place  of  residence.  When  such  an  association 
maintains  a  reserve,  expense,  or  other  fund,  the  amount  thereof  is  assessed  against 
the  association  as  other  personal  property  at  its  place  of  business. 

Each  association  is  required  to  make  the  same  verified  statement  as  other  cor- 
porations, and  in  addition,  must  state  the  total  amount  of  reserve  or  other  funds, 
and  the  actual  value  of  its  shares  of  stock. 

Each  local  association  is  also  required  to  mail  annually  to  the  several  county 
auditors  of  the  State  verified  statements,  showing  the  name  and  post-office  address 
of  every  stockholder  residing  in  their  respective  counties,  together  with  the 
number  and  value  of  shares  owned  by  each  person. 

The  auditor  of  State  is  required  to  send  to  the  various  county  auditors  the  name 
and  post-office  address  of  each  stockholder  of  a  foreign  association  residing  in  their 
respective  counties,  with  the  number  and  value  of  shares  owned  by  each,  as  reported 
to  him  by  such  association  in  compliance  with  the  law  governing  such  association. 

The  county  auditor  in  turn  furnishes  each  local  assessor  with  the  name  of  each 
stockholder  in  his  district  and  the  number  and  value  of  shares  owned  by  him, 
which  are  assessed  and  taxed  with  other  property  at  local  rates. 

TELEGRAPH  AND  TELEPHONE  COMPANIES. 

Each  telegraph  and  telephone  company  is  required  to  furnish  to  the  auditor  of 
State  an  annual  verified  report  showing: 

1.  The  total  number  of  miles  owned,  operated,  or  leased  within  the  State. 

2.  The  average  number  of  poles  per  mile  and  the  whole  number  within  the 
State. 

3.  The  total  number  of  miles  in  each  separate  line  and  the  number  of  separate 
wires  thereon. 

4.  The  whole  number  and  value  of  stations  and  their  value,  including  furniture. 

5.  The  whole  number  of  instruments  on  each  line  and  the  gross  rental  charges 
per  instrument. 

6.  The  gross  receipts  and  operating  expenses  for  the  previous  year  on  business 
originating  and  terminating  in  the  State. 

7.  Other  gross  receipts  and  operating  expenses. 

8.  The  total  capital  stock. 

9.  The  number  of  shares  issued  and  outstanding  and  the  par  or  face  value  of 
each. 

10.  The  market  value  of  such  shares  on  January  1  preceding,  and  if  they  have 
no  market  value,  then  the  actual  value. 

11.  All  real  estate  and  other  property  subject  to  local  taxation  within  the  State. 

12.  The  real  estate  and  improvements  thereon  owned  and  taxed  outside  the  State 
and  the  actual  value  thereof  where  located. 

13.  All  mortgages  upon  its  property,  with  dates  and  amounts  thereof. 

14.  The  total  length  of  lines  and  the  total  length  of  lines  outside  the  State. 
Such  statement  is  laid  before  the  State  executive  council,  which,  if  it  deems  it 

insufficient,  may  require  such  other  or  further  statement  as  it  may  desire.  A 
penalty  of  $100  per  day  is  imposed  for  failure  to  furnish  the  required  statement. 

The  executive  council  is  required  to  determine  and  fix  the  actual  cash  value  of 
the  property  of  such  companies  in  the  State  from  such  statements  and  other 
information  obtained,  also  taking  into  consideration  the  value  of  all  property  of 
such  companies,  including  franchises  and  the  use  of  the  property  in  connection 
with  lines  outside  the  State,  making  such  deduction  as  may  be  necessary  on 
account  of  extra  value  of  property  outside  the  State  as  compared  with  the  value 
of  property  within  the  State,  including  in  its  valuation  property  of  every  kind — 
real,  personal,  or  mixed — and  such  property  is  not  taxable  in  any  other  manner. 

Telegraph  lines  owned  and  operated  by  any  railway  company  exclusively  for 
its  business,  reported  under  the  law  for  the  taxation  of  railway  property,  are 
exempted  from  the  above  tax. 

It  will  be  observed  that  the  rules  provided  for  the  assessment  of  this  class  of 
property  on  property  values  are  quite  general  in  character,  leaving  the  final  val- 
uation largely  to  the  judgment  and  discretion  of  the  assessing  officers:  the  pur- 
pose being  to  subject  this  .class  of  property  at  an  ad  valorem  unit  valuation  to 
taxation  equivalent  to  the  taxes  imposed  upon  property  in  general.  It  is  an 


164  INDUSTRIAL    COMMISSION. 

attempt  to  adapt  the  general  property  tax  to  this  class  of  property  and  secure  a 
full  valuation  thereof. 

The  taxable  value  of  this  class  of  property  in  1899  was  $1,028,845.  and  amount 
of  taxes  paid  about  $85,000.  This  amount  was  paid  under  the  law  then  in  force, 
based  upon  unit  valuation  by  the  executive  council,  the  rate  being  fixed  by  the 
State  council  "at  the  average  rate"  throughout  the  State,  not  including  local 
taxes  on  real  estate  and  special  assessments,  and  was  paid  into  the  State  treasury. 
Under  the  amended  law  now  in  force,  as  above  set  forth,  the  taxes  on  these  com- 
panies will  be  greatly  increased. 

The  executive  council  ascertains  the  value  per  mile  of  the  property  of  each 
company  by  dividing  the  total  value  by  the  number  of  miles  within  the  State,  the 
result  being  deemed  to  be  the  actual  value  of  property  within  the  State,  the  tax- 
.able  value  being  one-fourth  of  the  actual  value,  as  in  case  of  other  property. 

Any  company  interested  has  a  right  to  appear  before  the  council  and  be  heard 
on  the  question  of  valuation  of  its  property  for  taxation. 

The  valuation  of  the  property  within  the  State  is  then  apportioned  among  the 
counties  in  proportion  to  mileage;  the  respective  amounts  are  then  duly  certified 
to  county  auditors,  and  in  turn  apportioned  to  local  taxing  districts  and  taxes 
collected  and  disposed  of  as  other  taxes  on  real  estate. 

It  is  specifically  provided  that  such  property  ' '  shall  be  taxable  upon  said  assess- 
ment at  the  same  rates,  by  the  same  officers  and  for  the  same  purposes  as  the  prop- 
erty of  individuals  "  within  the  local  taxing  districts,  and  collected  at  the  same 
time  and  manner  as  other  taxes.  Property  not  exclusively  used  in  the  business 
is  taxable  as  other  property,  and  the  shares  of  capital  stock  are  exempt  from  other 
taxation. 

INSURANCE  COMPANIES. 

In  the  taxation  of  insurance  companies  Iowa  has  recently  taken  a  distinct 
departure  from  the  general  property  tax  prevailing  in  the  general  system  of  taxa- 
tion in  that  State,  and  may  be  said  to  have  gone  to  the  opposite  extreme. 

In  the  new  taxation  code,  adopted  in  1897,  a  schedule  of  discriminating  or  infer- 
ential taxes  upon  insurance  companies,  based  upon  gross  premiums,  was  inaugu- 
rated. Statements  of  the  business  of  all  companies  operating  within  the  State 
are  required,  and  taxes  upon  the  gross  premiums  are  paid  into  the  State  treasury 
at  the  time  of  the  making  of  the  statements.  Under  the  original  law  these  State 
taxes  were  in  lieu  of  all  other  taxes,  State  and  local,  except  on  real  estate  and 
special  assessments. 

Companies  organized  in  foreign  countries  doing  business  in  Iowa  are  required 
to  pay  3£  per  cent  of  the  gross  premiums  received  for  insurance  on  property  or 
lives  of  persons  within  the  State.  Companies  organized  in  any  State  other  than 
Iowa  pay  2i  per  cent  and  the  rate  on  companies  organized  within  the  State  and 
on  stipulated  premium  or  assessment  associations  outside  the  State  is  1  per  cent. 
Upon  filing  receipts  for  the  payment  of  taxes  they  are  entitled  to  certificates  of 
authority  to  do  business  within  the  State.  No  deduction  on  account  of  any 
indebtedness  is  allowed. 

This  law  imposing  differential  taxes  on  insurance  companies  has  attracted  con- 
siderable attention  throughout  the  country,  and  seems  to  have  formed  a  prece- 
dent for  the  introduction  of  similar  measures  in  the  legislatures  of  other  States. 

By  reason  of  the  precedent  established,  rather  than  any  excessiveness  in  these 
discriminations,  the  law  was  met  with  positive  opposition  on  the  part  of  foreign 
companies,  and  active  steps  have  been  taken  to  test  its  validity. 

Soon  after  the  enactment  of  the  law  a  Swiss  company,  through  the  minister  to 
this  country,  protested  to  the  Secretary  of  State  at  Washington  against  the  law, 
alleging  that  the  law  was  in  contravention  of  treaty  stipulations  guaranteeing  to 
Swiss  companies  the  privileges  granted  to  domestic  companies.  The  protest  was 
submitted  to  the  governor  of  Iowa,  but  the  attorney-general  of  the  State  held  in 
an  opinion  that  the  law  did  not  violate  any  treaty  agreement  of  the  Federal  Gov- 
ernment, and  the  matter  in  this  instance  has  proceeded  no  farther. 

Taxes  were  paid  under  formal  protest  by  foreign  companies  generally,  and  a 
test  case  brought  in  the  courts,  in  which  the  validity  of  the  discrimination  was 
sustained  by  the  local  and  supreme  courts,  it  being  held  that  the  State  was  acting 
fully  within  its  constitutional  rights  in  placing  a  discriminating  tax  on  foreign 
insurance  companies. 

Another  company  in  1899  sought  to  enjoin  the  State  treasurer  from  collecting 
the  tax  under  this  law,  and  the  constitutionality  of  the  act  was  positively  affirmed 


IOWA    CORPORATION    TAXES.  165 

in  a  decision  by  Judge  Shiras  in  the  case  of  Manchester  Fire  Insurance  Company 
et  al.  v.  John  Herriott,  treasurer  (91  Fed.  Rep.,  711). 

In  this  case  it  was  declared  that  the  burden  was  not  a  tax  imposed  upon  the 
tangible  property  of  companies,  but,  in  the  form  of  a  tax  imposed  as  a  condition 
upon  their  right  to  continue  in  business  in  Iowa,  was  within  the  right  and  power 
of  the  State  to  impose. 

It  was  held  further  that  the  State  in  the  adoption  of  this  law  was  not  exercising 
its  right  to  subject  property  or  persons  within  the  State  to  taxation,  thereby 
becoming  subject  to  the  provisions  of  the  State  constitution  requiring  equality  in 
the  burdens  imposed;  but  was  exercising  its  right  to  prescribe  the  terms  upon 
which  foreign  corporations  might  be  allowed  to  do  or  continue  business  within 
the  State,  and  that  it  was  not  for  the  courts  to  question  the  expediency  or  justice 
of  the  conditions  imposed.  This  case,  so  far  as  we  know,  has  not  been  appealed. 

The  expediency  of  the  law,  however,  has  been  the  subject  of  some  controversy 
in  the  State.  In  his  biennial  report  of  1899  the  State  treasurer,  discussing  this 
law,  says: 

"  But  granting  that  it  is  within  the  power  of  the  State  to  discriminate  in  plac- 
ing tax  burdens  upon  corporations  doing  business  within  our  borders,  is  it  a  wise 
policy  for  Iowa  to  pursue?  Does  it  promote  the  best  interests  of  the  Deople?  Such 
discriminations  against  foreign  corporations  I  do  not  believe  are  beneficial.  They 
inevitably  engender  retaliations  against  our  State  companies  in  other  States  that 
may  seriously  embarrass  their  operations  and  progress  outside  of  Iowa,  and  they 
tend  to  produce  a  condition  of  things  within  our  own  borders  that  may  work  great 
detriment  to  our  home  companies.  The  insurance  of  business,  property,  or  life, 
if  it  is  a  good  thing,  and  no  one  nowadays  doubts  it,  should  be  encouraged  and 
promoted  by  the  State  by  all  proper  means,  and  discriminations  such  as  Iowa  has 
inaugurated  do  not  in  my  opinion  promote  the  best  interests  either  of  our  home 
companies  or  of  the  insuring  public.  Iowa  should  emulate  the  broader  policy  of 
New  T  ork  and  Massachusetts  and  treat  all  companies  as  nearly  as  may  be  alike. 

"This  present  statute  with  its  discrimination  against  foreign  companies  was 
passed  for  the  purpose  of  obtaining  increased  revenues  from  such  companies — not 
to  '  make  war '  on  them  or  to  drive  them  out  of  the  State,  as  generally  charged  by 
the  Eastern  press.  As  such,  the  act  only  passed  the  senate  by  1  vote.  There  was 
no  local  ill-feeling  against  such  companies.  The  home  companies  opposed  the 
passage  of  the  act  as  vigorously  as  the  foreign  companies.  But  while  passed  as  a 
revenue  measure,  the  additional  taxes  received  are  insignificant  compared  with 
the  great  harm  that  may  come  from  such  discrimination.  I  urge  the  restoration 
of  the  old  uniform  rate  on  United  States  and  foreign  companies  or  the  assessment 
of  the  same  rate  on  other  State  companies  now  imposed  on  foreign." 

The  constitutionality  of  this  law  taxing  insurance  companies  was  attacked  from 
another  standpoint,  the  clause  providing  that  taxes  paid  thereunder  *|  shall  be  in 
full  of  all  taxes,  State  and  local,  against  such  corporations  or  associations,  except 
taxes  on  real  estate  and  special  assessments;"  and  in  a  test  case  it  was  held  by  the 
supreme  court  that  under  the  constitutional  provision  requiring  that  corpora- 
tions shall  be  taxed  "the  same"  as  individuals  the  legislature  could  not  prevent 
counties  and  cities  of  the  State  from  listing  their  property  and  assessing  them  for 
taxation.  The  decision  of  the  court  followed  the  railroad  cases  decided  during 
the  sixties  and  seventies,  and  affected  the  taxation  of  telegraph,  telephone,  and 
express  companies.  The  decision,  it  will  be  seen,  renders  it  exceedingly  difficult, 
if  not  impossible,  under  present  constitutional  limitations,  to  tax  corporations 
in  Iowa  exclusively  for  State  purposes  according  to  modern  methods  of  assess- 
ment in  vogue  in  the  more  advanced  States. 

As  a  result  of  this  decision,  the  legislature  in  1900  passed  new  laws  for  the 
taxation  of  telegraph,  telephone,  and  express  companies,  as  set  forth  under  those 
heads,  providing  for  their  assessment  by  the  State  tax.  board  or  board  of  review, 
and  for  the  certification  of  their  valuation  to  the  local  authorities,  apportioning 
said  valuation  among  the  local  taxing  districts  according  to  mileage,  as  in  the 
case  of  railroads. 

The  decision  referred  to  apparently  bars  exclusive  State  taxes  on  corporations. 

This  case  is  of  great  importance  as  affecting  the  progress  of  corporate  taxation 
in  Iowa,  and  the  separation  of  State  and  local  taxes.  While  the  expediency  of 
the  discriminating  rates  may  be  justly  questioned,  the  method  unquestionably 
contains  sound  and  progressive  features,  the  principal  one  being  the  substitution 
of  a  fixed  and  definite  tax  from  which  there  is  no  escape,  imposed  by  the  State 
upon  companies  whose  business  extends  throughout  the  State,  for  the  antiquated 
method  of  assessing  such  companies  through  local  authorities.  The  taxes  paid 
under  this  law  in  1898  and  1899  exceeded  the  taxes  for  the  previous  2  years 


166  INDUSTRIAL    COMMISSION. 

under  the  former  law  by  857,902;  the  amount  of  taxes  during  the  last      years 
being  shown  by  the  following  table; 


Class. 

1898. 

1899. 

Iowa  companies 

$15  639  18 

$17  892  48 

Stipulated  assessment  associations  

1,419.91 

1  769  05 

United  States  companies 

112  213  72 

119  907  05 

Foreign  companies 

18  268  21 

18  058  49 

Grand  total  

147  541  02 

156  927  07 

Presumably  to  avoid  the  consequences  of  the  aforesaid  decision,  at  the  1900  ses- 
sion of  the  legislature  the  provisions  of  the  insurance-tax  law  applying  to  com- 
panies organized  within  the  State  were  amended,  and  it  is  now  provided,  with 
reference  to  domestic  companies,  that  the  shares  of  stock  of  every  such  corpora- 
tion having  capital  stock  shall  be  assessed  in  manner  provided  for  the  assessment 
of  shares  of  corporate  stock  in  general,  but  assessed  to  the  owners  thereof  at  the 
place  where  the  principal  business  is  transacted,  upon  the  value  of  shares  based 
upon  sworn  statements,  the  corporation  being  liable  for  the  payment  of  the  tax; 
and  also  that  the  corporation  shall  pay  a  tax  upon  gross  premiums,  as  provided  in 
the  amended  law,  and  that  such  shares  of  stock  shall  not  be  otherwise  assessed. 

The  law  further  provides  that  all  other  domestic  companies  except  corporations 
with  capital  stock,  county  mutuals,  and  fraternal  beneficiary  associations  not 
organized  for  pecuniary  profit,  shall  furnish  the  local  assessors  with  detailed 
statements  of  their  business  and  property,  and  value  thereof,  including  surplus, 
guaranty,  and  reserve  funds,  and  the  assessors  thereupon  shall  assess  against  each 
such  company  the  value  of  all  personal  property,  together  with  the  actual  value  of 
each  parcel  of  real  estate  in  the  assessment  districts,  all  of  which  is  to  be  assessed 
at  the  same  rate  and  for  the  same  purposes  as  the  property  of  individuals,  the 
taxable  value  being  25  per  cent  of  the  actual  value. 

Provision  is  made  for  the  deduction  of  debts  and  liabilities  of  such  companies 
from  their  moneys  and  credits. 

The  amended  law  further  provides  that  every  insurance  company  organized 
under  the  laws  of  Iowa,  not  including  county  mutuals  and  fraternal"  beneficiary 
associations  not  organized  for  pecuniary  profit,  shall  pay  annually  to  the  State 
treasurer  a  sum  equivalent  to  1  per  cent  of  the  gross  receipts  from  premiums, 
assessment  fees,  and  promissory  obligations  required  by  insurance  contracts 
received  during  the  preceding  year,  after  deducting  the  amounts  actually  paid  for 
losses  matured,  endowment  dividends  to  policy  holders,  and  the  increase  in  the 
amount  of  the  reserve  funds  provided,  whereupon  the  auditor  of  state  issues  the 
annual  certificate. 

RAILROADS. 

In  this  State  it  is  sought  to  bring  the  property  of  railway  companies  within  the 
general  property-tax  system  and  apply  thereto  the  general  principle  of  equality  of 
taxation  for  all  property,  taxing  it  upon  the  same  basis  as  the  property  of  indi- 
viduals. Assessments  are  made  on  estimated  property  values,  and  there  is  no 
franchise  tax  or  tax  on  receipts. 

The  assessment  of  all  property  of  each  railway  company  is  made  by  the  State 
executive  council,  except  real  estate  not  used  in  its  operation  and  railway  bridges 
across  the  Mississippi  and  Missouri  rivers,  and  grain  elevators,  which  are  subject 
to  assessment  and  taxation  on  the  same  basis  as  the  property  of  individuals  in  the 
several  counties  where  located. 

For  the  purpose  of  such  assessment,  each  corporation  is  required  to  furnish  the 
council  annual  verified  statements  showing  in  detail — 

First.  The  whole  number  of  miles  of  railway  owned,  operated,  or  leased  within 
and  without  the  State. 

Second.  The  whole  number  of  miles  within  the  State,  showing  the  number  of 
miles  of  track  in  each  county. 

Third.  A  detailed  statement  showing  the  amount  of  real  estate  owned  or  used 
in  the  operation  thereof  in  each  county  within  the  State  for  all  purposes,  and  the 
estimated  value  thereof, in  such  manner  as  maybe  required  by  the  council. 

Fourth.  A  complete  statement  of  the  cost  and  actual  present  value  of  all  build- 
ings owned  within  the  State  not  otherwise  assessed. 

Fifth.  The  total  number  of  ties  per  mile  used  on  all  tracks  within  the  State. 


IOWA    CORPORATION    TAXES.  167 

Sixth.  The  weight  of  rails  per  yard  in  main  line,  double  track,  and  sidetracks. 

Seventh.  The  number  of  miles  of  telegraph  lines  within  the  State. 

Eighth.  The  total  number  of  engines  and  cars  of  all  kinds  in  use  on  its  line,  and 
sleeping  cars  owned  by  it,  and  the  number  of  each  class  within  the  State,  each 
class  to  be  valued  separately. 

Ninth.  Any  and  all  other  movable  property  owned  within  the  State. 

Tenth.  The  gross  earnings  of  the  entire  road  and  the  gross  earnings  in  the  State. 

Eleventh.  The  operating  expenses  of  the  entire  road  and  the  necessary  expenses 
within  the  State. 

Twelfth.  The  net  earnings  of  the  entire  road  and  the  net  earnings  within  the 
State. 

It  is  specifically  provided  that  operating  expenses  reported  shall  not  include  any 
payments  for  interest  or  discount,  or  construction  of  new  tracks  and  other  perma- 
nent improvements,  for  new  equipment  except  replacement,  for  reducing  bonded 
or  permanent  debt,  nor  any  other  item  not  fairly  or  reasonably  chargeable  as  such 
in  railway  accounts,  it  being  apparently  intended  that  net  earnings  shall  be  a 
factor  in  determining  property  values.  It  is  provided  that  such  property  shall  be 
valued  at  its  actual  value  and  assessments  made  upon  the  taxable  value— that  is, 
25  per  cent  of  actual  value — of  the  entire  railway  within  the  State,  including  right 
of  way,  roadbed,  bridges,  culverts,  rolling  stock,  depots,  station  grounds,  shops, 
buildings,  gravel  beds,  and  all  other  property,  real  and  personal,  exclusively  used 
in  the  operation  of  such  road. 

The  council  is  commanded  to  take  into  consideration  the  gross  earnings  per 
mile  for  the  previous  year  and  any  and  all  other  matters  necessary  to  enable  it  to 
make  a  just  and  equitable  assessment  of  such  property,  and  if  a  part  of  any  rail- 
way is  outside  the  State,  then,  in  estimating  the  value  of  its  rolling  stock  and 
movable  property,  the  proportion  which  the  business  of  that  part  within  the  State 
bears  to  the  business  without  the  State  is  taken  into  consideration. 

The  executive  council,  after  determining  the  whole  value,  transmits  to  the 
county  auditor  of  each  county  through  and  into  which  any  railway  may  extend 
a  statement  showing  the  length  of  main  track  within  the  county  and  the  assessed 
value  per  mile  of  the  same,  as  fixed  by  a  ratable  distribution  per  mile  of  the 
assessed  valuation  of  the  whole  property  of  the  company. 

The  county  board  of  supervisors  thereupon  causes  such  statement  to  be  entered 
in  its  minute  book,  and  enters  therein  an  order  stating  the  length  of  the  main 
track,  and  the  assessed  value  of  each  railway  lying  in  each  city,  town,  township, 
or  lesser  taxing  district  in  the  county  through  or  into  which  said  railway  extends, 
as  fixed  by  the  council,  which  constitutes  the  taxable  value  thereof  for  taxing 
purposes,  and  the  taxes  when  collected  by  the  county  treasurer  are  disposed  of  as 
other  taxes. 

"All  such  railway  property  shall  be  taxable  upon  said  assessment  at  the  same 
rate,  by  the  same  officers  and*  for  the  same  purposes  as  the  property  of  individuals 
within  such  counties,  cities,  towns,  townships,  and  lesser  taxing  districts." 

Each  railway  company  is  also  required  to  show  in  its  annual  statement  the 
number  of  sleeping  and  dining  cars  not  owned  by  it  but  used  in  operation  in 
the  State  during  each  month  of  the  year,  the  value  of  each  car  so  used,  and  the 
number  of  miles  each  month  said  cars  have  been  run  on  such  road  within  the 
State  and  the  total  number  of  miles  run  within  and  without  the  State. 

The  council  assesses  for  taxation  the  average  number  of  cars  so  used  each 
month,  and  the  assessed  value  of  said  cars  shall  bear  the  same  proportion  to  the 
entire  value  thereof  that  the  monthly  average  number  of  miles  such  cars  have 
run  within  the  State  bears  to  the  monthly  average  within  and  without  the  State. 
Such  valuation  is  required  to  be  in  the  same  ratio  as  that  of  property  of  individuals, 
and  is  added  to  the  assessed  value  of  the  general  property  of  the  company.  It  will 
be  observed  that  the  assessed  valuation  is  based  on  total  car  mileage  and  not  upon 
varying  passenger  traffic. 

This  law  does  not  specifically  exempt  shares  of  stock  in  railroad  companies  from 
taxation  in  the  hands  of  owners  residing  within  the  State,  but  in  practice  such 
shares  do  not  seem  to  be  assessed  to  the  individual  owners. 

The  assessed  valuation  of  9,236  miles  of  railway  in  Iowa  for  the  year  1899  was 
$46,008,510,  being  an  average  assessed  value  of  $4,891  per  mile  of  road.  The 
assessed  value  being  25  per  cent  of  the  actual  value  as  fixed  by  the  assessing  board, 
it  follows  that  the  full  valuation  so  fixed  for  1899  was  $184,034,040. 

The  total  amount  of  taxes  paid  by  the  railways  of  the  State  in  1899  was  $1,424,- 
134.04,  making  the  rate  on  the  actual  value  $0.774  on  each  $100. 

The  gross  earnings  for  1899  were  $49,549,679.77,  the  operating  expenses  $34,028,- 
678.63,  making  the  net  earnings  $15,521.001.14,  the  taxes  paid  being  substantially 
2.87  per  cent  of  the  gross  earnings,  and  more  than  9  per  cent  of  the  net  earnings. 


168  HSTDUSTKIAL    COMMISSION. 

Capitalizing  on  the  basis  of  net  earnings  at  6  per  cent,  as  is  sometimes  done,  to 
obtain  a  rough  estimate  of  the  actual  value  of  such  property,  the  value  of  Iowa 
roads  would  be  .$259,449,382. 

The  total  assessed  value  of  sleeping-car  lines  taxed  by  the  method  above 
described  in  1899  was  $183,183,  these  lines  being  taxed  at  local  rates  upon  that 
aggregate  valuation. 

Formerly,  from  1862  to  1872,  Iowa  taxed  railroads  on  "  gross  earnings,"  levying 
a  flat  rate  thereon.  The  legislature  changed  the  plan  adopting  the  present  method 
of  assessment  at  "  actual  value."  This  has  apparently  had  a  demoralizing  effect 
and  resulted  in  grave  discriminations  and  injustice  in  the  taxation  of  railroad 
property,  and  charges  of  favoritism  and  corruption  are  freely  made  against  those 
in  whom  from  time  to  time  is  vested  the  "  discretionary  power  "  to  fix  railroad 
valuations  for  taxation. 

The  present  State  treasurer  in  a  pamphlet  recently  published  vigorously  sets 
forth  the  evils  of  the  present  system  and  the  injustice  resulting  to  both  railways 
and  the  public. 

He  says  in  substance  that  there  is  neither  sense  nor  system  in  the  assessment  of 
railroads  in  Iowa,  '•  chaos  "  being  the  only  '•  descriptive  in  Webster  applicable; " 
that  by  reason  of  the  •'  discretionary  power  "  lodged  in  the  executive  council  rail- 
road assessments  in  Iowa  have  become  a  serious  danger  to  the  public  welfare; 
that  because  of  its  perversion,  corruption  of  the  most  serious  character  has 
crept  into  party  politics;  that  railroads  are  compelled  to  take  part  in  politics  and 
seek  to  control  the  taxation  machinery.  He  cites  numerous  instances  of  grievous 
discrimination  in  the  assessment  of  railroads  in  favor  of  the  great  lines  that  are 
influential  in  politics.  For  instance,  the  Crooked  Creek  Railway  is  compelled  by 
the  executive  council  to  pay  on  $233  for  every  $100  of  gross  earnings,  while  the 
Northwestern  pays  on  only  $72.  "  In  other  words,  the  weaker  road  is  assessed 
3  times  higher  than  the  richest  and  most  powerful  trunk  line  in  the  State. "  Again, 
in  actual  taxes  the  Great  Western  has  been  compelled  to  pay  $21.50  for  every 
$100  of  its  net  earnings,  while  its  great  competitor,  the  Northwestern,  has  been 
required  to  pay  only  $8.40  of  each  $100  of  its  net  income. 

Other  glaring  instances  of  favoritism  and  inequalities  in  railroad  assessments 
are  set  forth,  showing  the  utter  lack  of  plan  and  uniform  procedure  in  that  regard. 
The  treasurer  declares  the  only  remedy  to  be  a  definite  rule  fixed  by  legislation 
for  assessing  railroads  from  which  there  can  be  no  deviation.  "  If  the  council 
is  to  have  charge,  its  '  discretionary  power  '  should  be  reduced  to  a  minimum  or 
abolished."  The  same  yardstick  should  be  applied  to  all  roads. 

The  writer  then  says  that  the  easiest  method  for  securing  equality  of  assess- 
ment is  the  flat  rate  or  the  fixed  charge  on  earnings  or  income,  or  on  the  property 
of  railroads. 

"  For  obvious  reasons  the  flat  rate  on  gross  earnings,  business,  or  property  can 
be  most  readily  assessed.  There  is  no  trouble  about  deductions  or  debts,  and  it 
can  not  be  evaded.  Material  objections  can  be  made  because  this  method  ignores 
the  expense  account  of  roads  or  their  varying  earning  capacities.  But  the  cer- 
tainty and  uniformity  of  the  taxable  basis  make  this  method  decidedly  preferable 
to  the  present  Iowa  practice.  There  would  be  no  abuse  of  discretionary  power — 
no  favoritism  under  this  method." 

He  also  views  with  some  favor  the  taxation  of  such  corporations  on  the  basis 
of  the  market  value  of  stock  and  bonds,  as  in  Connecticut,  regarding  it  as  an 
improvement  upon  the  existing  system. 

He  clearly  sets  forth  the  inherent  weakness  of  a  method  that  seeks  to  adapt  the 
general  property  tax  to  this  class  of  property,  viz:  The  necessity  of  vesting  in 
officials  "  discretionary  power"  with  respect  to  adjustment  of  property  valuation 
or  rate  of  taxation  in  order  to  secure  " equal "  and  "uniform "  taxation,  invari- 
ably resulting  in  actual  practice  in  unequal  taxation. 

WATER  AND  GAS  WORKS,  ELECTRIC  PLANTS,  STREET  RAILWAYS. 

The  real  and  personal  property  of  these  companies  is  listed  and  assessed  in  the 
assessment  districts  where  the  same  is  located.  Where  such  property,  except  the 
capital  stock,  is  situated  partly  within  and  partly  without  the  limits  of  a  city  or 
town,  such  portions  are  assessed  separately,  the  portion  within  the  said  city  or 
town  being  assessed  there  and  the  other  portion  assessed  in  the  districts  where 
located.  The  actual  value  of  capital  stock  over  and  above  that  of  the  property 
listed  and  taxed  as  above  described  is  assessed  and  taxed  to  the  owners  thereof  at 
the  place  where  the  principal  business  is  located,  as  other  shares  of  corporation 
stock  hereinbefore  referred  to. 


IOWA    CORPORATION    TAXES.  169 

EXPRESS  COMPANIES. 

Up  to  1900  the  tangible  property  of  these  companies  was  assessed  and  taxed  in 
like  manner  as  other  tangible  property  was  assessed  and  taxed  in  the  local  dis- 
tricts where  the  same  was  located. 

An  additional  tax  was  imposed  upon  the  receipts  of  these  companies,  each  com- 
pany being  required  to  deliver  to  the  auditor  of  State  annual  verified  statements 
showing  the  entire  receipts  for  business  done  within  the  State,  of  each  agent 
doing  business  in  the  State,  including  its  proportion  of  gross  receipts  for  business 
done  in  connection  with  other  companies,  such  statement  to  contain  an  abstract 
of  the  amount  received  in  each  county  and  the  total  amount  for  all  the  counties, 
a  penalty  of  $100  for  each  day  delay  after  a  fixed  date  in  rendering  such  accurate 
statement  being  imposed  and  such  delinquent  companies  being  prohibited  from 
carrying  on  business  until  such  statement  is  made.  Each  company  was  required 
to  pay  into  the  State  treasury  at  the  time  of  making  such  statement  the  sum  of  $1 
on  each  $100  of  such  receipts.  The  yield  of  this  special  State  tax  was  as  follows: 


Year. 

Receipts. 

Tax. 

1898  .  .  . 

$392  579  84 

$3  925  80 

1899  

412  693  91 

8  253  91 

A  new  method  for  the  assessment  and  taxation  of  express  companies  was 
enacted  by  the  legislature  of  the  State  in  April,  1900,  and  is  now  in  force,  although 
no  results  are  as  yet  obtainable.  Each  company  is  now  required  to  file  with  the 
State  auditor  an  annual  verified  statement  showing — 

First.  The  name  and  character  of  the  company. 

Second.  The  principal  place  of  business,  locality  of  principal  office,  and  names 
and  address  of  principal  officers. 

Third.  The  total  capital  stock  (a)  authorized;  (6)  issued. 

Fourth.  The  number  of  shares  of  stock  issued  and  outstanding. 

Fifth.  The  market  value  of  shares  on  January  1  preceding,  and  if  no  market 
value,  then  the  actual  value,  and  in  case  no  shares  of  stock  have  been  issued  the 
market  or  actual  value  of  the  capital  thereof. 

Sixth.  The  real  estate  and  personal  property  owned  and  subject  to  local  taxa- 
tion within  the  State,  and  location  and  actual  value  thereof  in  the  county,  town- 
ship, or  district  where  the  same  is  assessed  for  local  taxation. 

Seventh.  The  specific  real  estate,  with  improvements  thereon,  and  all  bonds, 
mortgages,  and  other  personal  property  owned  and  situated  outside  the  State  and 
used  exclusively  outside  the  conduct  of  the  business,  with  a  specific  description  of 
all  bonds,  mortgages,  and  other  personal  property  and  the  cash  value  thereof,  the 
purposes  for  which  used  and  where  kept,  and  each  piece  of  real  estate,  where 
located,  the  purposes  for  which  used,  and  actual  value  thereof  in  the  locality 
where  situated. 

Eighth.  All  mortgages  upon  the  whole  or  any  part  of  its  property,  with  dates 
and  amounts  thereof. 

Ninth.  Total  length  of  lines  or  routes  over  which  it  transports;  the  total  length 
of  such  lines  outside  the  State;  the  length  within  each  of  the  counties,  townships, 
and  assessment  districts  in  the  State. 

Also  to  make  such  further  statement  as  the  auditor  may  require.  Such  state- 
ment and  other  information  is  placed  before  the  members  of  the  executive  coun- 
cil, who  value  and  assess  the  property  from  such  statements  and  such  other 
information  as  they  may  obtain,  being  empowered  to  bring  before  them  the 
agents  or  officers  of  such  company,  with  such  books,  papers,  or  statements  as  they 
may  require,  and  compel  the  attendance  of  witnesses. 

Any  company  may,  upon  written  application,  appear  before  such  council  and 
be  heard  in  the  matter  of  valuation  of  its  property  for  taxation. 

The  executive  council  ascertains  the  actual  value  of  the  entire  property  pwned 
by  such  company,  taking  the  aggregate  market  value  of  its  shares  of  stock,  and 
in  case  the  property  is  encumbered  by  mortgage,  adding  to  the  market  value  of 
stock  or  capital  the  market  or  cash  value  of  such  mortgages.  The  council  then 
proceeds  to  determine  the  value  of  the  property  within  the  State  by  deducting 
proportionate  values  of  property  without  the  State,  and  from  the  entire  actual 
value  of  property  within  the  State  so  ascertained  deducts  the  actual  value  of  real 
estate  and  of  personalty  not  used  exclusively  in  the  conduct  of  business  within 
the  State  and  which  is  subject  to  local  taxation. 


170  INDUSTRIAL    COMMISSION. 

The  value  per  mile  is  then  determined  by  dividing  the  whole  value  as  above 
obtained  by  the  number  of  miles  within  the  State.  One-fourth  of  the  actual 
value  thus  determined  is  the  assessed  or  taxable  value,  in  the  same  ratio  as  the 
property  of  individuals. 

This  assessed  valuation  is  apportioned  among  the  several  counties  in  proportion 
to  the  mileage  and  certified  to  the  county  auditors.  This  is  in  turn  apportioned 
to  and  taxes  collected  by  the  various  local  taxing  districts  "at  the  same  rates, 
by,  the  same  officers,  and  for  the  same  purposes  as  the  property  of  individuals 
within  such  counties,  townships,  or  assessment  districts,"  and  the  property  so 
included  and  the  shares  of  stock  are  not  otherwise  taxed. 

COLLATERAL  INHERITANCE  TAX. 

All  property  of  every  kind  within  the  jurisdiction  of  the  State,  passing  by  will 
or  the  statutes  of  inheritance  of  any  State,  or  by  deed,  grant,  sale,  or  gift  made 
or  intended  to  take  effect  after  the  death  of  the  grantor  or  donor,  to  any  person 
in  trust  or  otherwise,  other  than  the  father,  mother,  husband,  wife,  or  lineal 
descendants  of  a  decedent,  or  charitable,  educational,  or  religious  societies  within 
the  State,  is  subjected  to  a  tax  of  5  per  cent  of  its  value  in  excess  of  $1,000  after 
payment  of  debts.  This  tax  is  for  the  use  of  the  State. 

Yield  of  the  lax. 

1898..  .  $22,650.75 

1899 _  -    28,264.99 


TEXAS. 

The  distinguishing  features  of  the  taxation  system  in  this  comparatively  new 
State  are  the  general  property  tax  applied  to  the  property  of  individuals  and  cor- 
porations, the  general  law  providing  for  an  ad  valorem  tax  on  all  real  and  per- 
sonal property  in  the  State;  a  poll  tax,  an  occupation  tax,  and  special  taxes  on 
gross  receipts  of  certain  classes  of  corporations. 

The  constitution  of  this  State  provides  that  taxation  shall  be  equal  and  uniform. 
All  property  in  the  State  except  that  which  is  exempt,  whether  owned  by  natural 
persons  or  corporations,  shall  be  taxed  in  proportion  to  its  value,  to  be  ascertained 
as  provided  by  law;  the  legislature  may  impose  a  poll  tax,  occupation  taxes 
both  upon  natural  persons  and  corporations,  and  may  tax  incomes.  Limitations 
are  by  law  placed  upon  the  amounts  that  can  be  levied  for  State  and  various  local 
purposes. 

The  legislature  levies  the  tax  for  general  State  and  school  purposes,  the  com- 
missioners' court  of  each  county  levies  the  county  tax,  and  the  city  or  town  coun- 
cil that  for  cities  and  towns. 

The  assessment  of  all  taxable  property  is  made  by  elective  county  assessors 
required  to  seek  out  the  owners  of  taxable  property  in  their  respective  counties 
and  obtain  lists  of  the  taxable  property,  the  taxpayer  being  required  to  sign  an 
affidavit  that  he  has  rendered  a  complete,  full,  and  true  list  of  all  his  property 
subject  to  taxation,  but  not  to  make  oath  to  its  value.  The  valuation,  therefore, 
is  in  practice  fixed  by  the  assessors,  with  the  usual  results  that  property,  instead 
of  being  valued  as  required  by  law,  at  its  "  full  and  true  value,"  is  unequally  val- 
ued and  undervalued.  There  is  no  systematic  plan  in  use  for  the  valuation  and 
equalization  of  property  for  taxation,  and  in  this  respect  "  inequality  is  the  rule 
and  equality  and  uniformity  the  exception.  The  wealthy  and  influential  prop- 
erty owner  pays  the  least  in  proportion  to  what  he  possesses,  and  the  small  holder 
of  property  pays  the  most." 

The  tendency  there  as  elsewhere  is  for  assessors  and  taxpayers  to  connive  in 
various  ways  to  secure  assessments  at  a  portion  of  the  true  value  of  property,  in 
order  that  the  local  district  may  avoid  payment  of  a  just  proportion  of  the  State 
tax. 

Common  control  or  supervision  of  State  taxation  is  impossible  under  the  present 
constitution,  which  commits  to  the  commissioners'  courts  of  the  respective  coun- 
ties the  supervision  of  values  for  taxation.  There  being  no  central  or  supervisory 
power  for  the  enforcement  of  uniform  valuations,  the  result  is  a  distinct  valuation 
of  the  same  classes  of  property  in  each  county  in  the  State  and  inevitable  inequal- 
ity and  undervaluation. 

REAL  ESTATE. 

Under  the  system  that  has  grown  up  under  the  present  constitution,  adopted 
when  nearly  all  property  consisted  of  land,  that  class  of  property  is  still  the 
principal  object  of  taxation  and  is  said  to  bear  an  unjust  proportion  of  tax  bur- 
dens. Aside  from  the  great  inequalities  in  the  taxation  of  land  in  local  districts, 
it  is  shown  that  a  much  larger  proportion  of  its  total  value  is  assessed  for  taxa- 
tion for  State  and  local  puposes  than  in  the  case  of  personal  property. 

A  comparison  is  made  by  the  tax  commission  of  1899  in  its  distinguished  report, 
illustrating  this  discrimination  according  to  the  census  of  1890.  The  value  of 
real  estate  in  Texas  was  then  $1,220.417,771,  and  that  of  personal  property 
$885,158,995,  a  total  of  $2,105,576,776.  The  taxable  value  of  land  assessed  for  that 
year  was  $378,752,718,  to  which  is  added  the  value  of  town  lots,  $145,524,497,  to 
give  the  total  taxable  value,  $524,277,210. 

The  assessed  value  of  all  other  property  in  that  year,  including  railroads,  was 
$257,834,673,  or  a  total  assessed  value  of  all  property  of  $782,111,883,  against  the 
real  valuation  as  shown. 

This  leads  the  commission  to  say  that  "  Land  has  borne  and  is  bearing  the 
burden  of  taxation  in  Texas,  as  it  probably  is  throughout  the  country.  It  bears 
about  double  as  much  in  this  State  on  the  dollar  of  its  real  value  as  personal 

171 


172  INDUSTKIAL    COMMISSION. 

property."  And  again:  "  But  as  all  prosperity  depends,  primarily,  on  the  success- 
ful cultivation  of  the  soil  and  the  harvesting  of  its  productions,  it  ought  to  be 
the  purpose  to  relieve  it  from  a  greater  tax  burden  than  that  which  other  prop- 
erty, equally  or  more  productive,  bears.  With  this  end  in  view,  we  have  for- 
mulated provisions  which  it  is  believed  will  compel  other  property  in  the  State 
to  contribute  its  fair  proportion  of  taxes.  If  light  taxes  be  con'ducive  to  the 
acquirement  of  any  particular  kind  of  property,  then  Texas,  above  all  other 
things,  should  by  this  policy  encourage  every  citizen  to  own  a  home.  The  own- 
ership of  a  home  gives  stability  and  permanency  to  our  citizenship;  encourages  a 
love  and  pride  of  State  and  country;  is  a  bulwark  of  safety  and  protection  to 
our  institutions  and  to  all  the  people,  and  the  surest  and  safest  way  to  lasting 
prosperity." 

PERSONAL  PROPERTY. 

The  system  of  taxation,  framed  with  a  view  to  making  land  the  principal  source 
of  revenue,  seems  to  be,  under  the  conditions  that  have  developed,  especially 
conducive  to  inadequate  taxation  of  personal  property.  The  tax  commission  of 
1899,  in  the  discussion  of  this  subject,  contrasts  the  energy  with  which  the  Federal 
revenue  laws  are  enforced  by  the  revenue  collectors,  and  in  the»courts  when  need 
be,  with  the  universal  laxity  in  the  enforcement  of  State  revenue  laws  in  Texas, 
describing  the  method  in  vogue  in  that  State  as  follows:  "In  our  State  the 
assessment  and  collection  of  the  revenue  is  confided  to  officers  who  are  chosen 
every  2  years,  and  the  owner  of  personal  property  is  not  always  pressed  to 
know  if  he  has  any  he  has  not  listed.  He  signs  the  affidavit  in  a  perfunctory 
manner  and  that  ends  the  inquiry.  The  law  taxes  the  property  that  has  been 
sent  beyond  the  State  or  county  for  the  evasion  of  taxation,  but  such  property  is 
rarely  reached.  The  man  with  thousands  of  dollars  in  the  bank  sends  his  clerk 
to  render  his  property  and  tells  him  to  render  $5,000  in  money  when  he  may  have 
50  and  probably  100,000.  Or  maybe  he  will  ask  for  a  draft  on  New  York  for  his 
deposit  with  the  bank  a  few  days  before  the  1st  of  January.  This  he  will  put 
into  his  pocket  and  keep  there  until  January  1  has  passed,  and  thus  this  particular 
property,  though  subject  to  taxation  under  the  law,  is  not  listed." 

It  is  shown  that  the  tax  levied  against  personal  property  in  1898  was  only 
24.39  per  cent  of  the  ad  valorem  State  tax  assessed  for  general  revenue  and  school 
purposes,  and  including  railroad,  telegraph,  telephone,  and  street  railroads  was 
only  32  per  cent,  or  less  than  one-third  the  whole  amount,  and  that  real  estate, 
including  in  the  term  "  acres  and  town  lots,"  paid  68  per  cent.  "  It  is  an  admitted 
fact,"  the  commission  says,  "  that  money  at  interest,  stock,  mortgages,  as  well  as 
other  forms  of  personal  property,  escape  taxation  in  this  State  to  an  extent  that 
is  alarming." 

The  commission  urges  that  more  stringent  laws  be  enacted  and  energetically 
enforced  compelling  such  property  to  yield  to  taxation,  and  says  that  "if  a  time 
should  come  when  it  is  admitted  that  this  can  not  be  done,  the  State  should  evolve 
another  system,  and  look  in  another  direction  for  revenue  for  the  carrying  on  of 
the  machinery  of  the  State  government."  As  indicating  the  low  tax  rates  in 
Texas,  even  under  present  conditions,  we  note  the  suggestion  of  the  commission 
that  if  equality  in  values  and  full  rendition  of  property  for  taxation  could  be 
obtained,  the  tax  rate  for  State  purposes  would  be  lowered,  even  under  the  present 
system,  to  such  a  sum  as  to  be  almost  unnoticeable.  That  if  all  property  were 
to  respond  to  its  full  value,  a  tax  rate  of  2  cents  on  the  $100  would  be  ample  for 
all  the  needs  of  the  State  for  general  State  and  school  purposes. 

Money  at  interest  and  other  credits  over  and  above  the  amount  which  a  taxpayer 
pays  interest  for,  and  all  other  debts  due  over  and  above  his  own  indebtedness,  are 
taxable. 

The  tax  commission  recommended  to  the  legislature  the  omission  of  this  right 
of  deduction  on  the  ground  that  it  is  a  convenient  loophole  for  escape  from  pay- 
ment of  just  taxes,  operates  unfairly  against  those  who  have  no  credits  from 
which  to  deduct  their  debts,  the  condition  of  most  taxpayers,  and  is  the  "  unfair- 
est  provision  in  our  tax  laws." 

To  the  money  lender  it  is  said  to  amount  almost  to  exemption  from  taxation. 
The  commission  says  that  the  amount  of  real  estate  and  chattel  mortgages  in  the 
State  will  probably  reach  $250,000,000,  and  the  amount  of  credits  rendered  for 
taxation  will  not  exceed  6  per  cent  of  that  amount,  being  in  1898  $13,318,920. 

MORTGAGES. 

The  taxation  of  credits,  and  especially  those  secured  by  real-estate  mortgages  in 
Texas  as  in  other  States,  is  a  subject  of  commanding  interest  and  importance. 

Under  the  laws  of  Texas,  credits  in  whatever  form  are  subject  to  taxation 
as  other  property  in  general,  but  no  special  provision  is  made  by  law  for  the 


TAXATION    IN    TEXAS. 


173 


recovery  and  rendition  for  taxation  of  notes  secured  by  mortgage,  the  assessment 
of  such  property  depending  upon  the  independent  action  of  each  local  assessor. 
Consequently  very  few  credits  of  this  character  are  reached.  The  amount  of 
credits  rendered  for  taxation  in  1898  was  §13,318,920  and  in  1900  $16,103,802. 
What  portion  of  these  respective  amounts  represented  real-estate  mortgages  can 
not  be  given,  but  it  is  probably  small.  In  1890  real-estate  mortgages  in  force  in 
the  State  amounted  to  $93,864,178,  and  the  amount  has  undoubtedly  greatly 
increased  since  that  time. 

The  tax  commission  devised  a  special  method  for  the  rendition  and  assessment 
of  this  class  of  securities,  based  upon  the  public  records  of  such  securities,  and 
making  it  unlawful  for  persons  loaning  money  on  such  security  to  require  the 
person  borrowing  to  pay  the  tax  thereon,  such  requirement  to  be  usury  and 
subject  to  the  usury  laws  of  the  State.  The  commission,  reviewing  the  methods 
for  taxation  of  mortgages  in  other  States  and  the  arguments  for  and  against  such 
taxation,  advocates  the  taxation  of  such  securities  in  Texas  the  same  as  other 
property. 

POLL  TAX. 

A  poll  tax  of  $1.50  is  imposed  by  the  State  upon  every  male  citizen  between  the 
ages  of  21  and  60  years,  $1  of  which  goes  to  the  available  school  fund  and  50  cents 
to  the  general  revenue  of  the  State.  The  collection  of  this  tax  seems  to  be  some- 
what difficult,  and  a  considerable  proportion  of  the  assessed  poll  tax  is  not  paid. 
In  1898  the  poll  tax  assessed  was  $773,487.24,  and  the  amount  actually  collected 
was  $520, 753. 13. 

TAX  ON  OCCUPATIONS. 

The  tax  on  occupations,  or  privilege  tax,  is  a  distinctive  and  apparently  popular 
feature  in  the  Texas  system  of  taxation,  and  although  the  stringent  laws  provided 
in  regard  to  it  are  imperfectly  enforced,  about  one- third  of  the  State's  revenue  is 
derived  from  this  source.  It  is  a  kind  of  indirect  tax  upon  the  people  of  the  State 
for  the  purposes  of  revenue,  regulation  of  business,  and  promotion  of  the  public 
welfare,  and  is  quite  generally  imposed  upon  occupations  and  business. 

The  law  provides  that  there  shall  be  levied  on  and  collected  from  every  person, 
firm,  company,  or  association  of  persons,  an  annual  tax  on  every  occupation  or 
separate  establishment  as  shown  by  the  following  list: 

Table  of  occupations  taxed. 


Series. 

Occupation. 

Specifications. 

Tax. 

Amount 
paid  year 
ending 
Apr.  30, 
1900. 

1 

Alley,  nine  or  ten  pin  

Or  other  alley  or  like  device       

$100.00 

$5,  400.  00 

2 

Auctioneers  

10  00 

540  00 

3 

4 

Bankers  or  brokers  
Baseball  park 

Or  dealers  in  exchange,  stocks,  bonds, 
warrents,  etc. 
In  citv  of  5  000  inhabitants  or  more 

50.00 
25.00 

9,  962.  50 

5 

Beer  dealer 

Selling  malt  liquor  exclusively 

50  00 

87  400  00 

6 

Billiard,  pool,  or  other  table. 

Each  table            .  .          ... 

20.00 

11,200.00 

7 

Cigarette  dealer 

In  addition  to  anv  other  tax 

10  00 

3  790  00 

8 

Circus  .  .  . 

Admission  fee,  including  reserved  seat,  $1  . 

250.00 

250.00 

9 

do 

Admission  fee  including  reserved  seat,  75 

200.00 

600.00 

10 

do  

cents. 
Admission  fee,  including  reserved  seat,  50 

100.00 

700.00 

11 

Cockpit 

cents. 

50  00 

300.  00 

12 

Commission  

Selling  on  

10.00 

2,  390.  00 

13 

do 

Selling  on  samples  in  city  of  over  10,000 

50.00 

14 

do  

inhabitants. 
Selling  on  samples  in  city  of  10,000  inhabi- 

25.00 

25.00 

15 

Concert 

tants  or  less. 
Each  performance 

2.00 

1,  564.  00 

16 

10  00 

2,  830.  00 

17 

18 

Cotton    factor,    broker,   or 
commission  merchant, 
do        

In  city  of  10,000  inhabitants  or  more  
In  citv  of  less  than  10,000  inhabitants  

35.00 
18.00 

1,330.00 
180.00 

19 

Cotton-seed  products 

Wholesale  dealer                   

25.00 

150.  00 

20 

Dentist 

5.00 

2,  015.  00 

21 
22 

Eiectric-light  company  
do 

In  city  of  10,000  inhabitants  or  more  
In  citv  of  less  than  10,000  inhabitants  

35.00 
20.00 

490.00 
1,140.00 

23 

Exhibition,  acrobatic  feats, 
menagerie,  waxworks, 
museum,  or  side  show. 

Each  performance  or  exhibition  

10.00 

150.  00 

174 


INDUSTRIAL    COMMISSION. 
Table  of  occupations  taxed — Continued. 


Series. 

Occupation. 

Specifications. 

Tax. 

Amount 
paid  year 
ending 
Apr.  30, 
1900. 

« 
24 

25 
26 

27 

28 
29 

30 

31 
32 
33 
34 
35 

36 
37 

38 

39 
40 

41 
42 
43 
44 
45 
46 
47 

48 
49 
50 

51 
52 

53 
54 

55 
56 

57 
58 
59 
60 
61' 
62 
63 
64 

65 
66 

Exhibition   by  vender  of 
medicine,  belts,  or  other 
articles. 
Exhibition   by  sleight   of 
hand  or  legerdemain. 
Exhibition,  stereos  c  o  p  i  c 
views. 

Exhibition,    waxworks, 
menagerie  or  exhibition 
of  any  kind. 
Fights  between  animals  
Flying    jenny   or   hobby- 
horses or  like  device. 
Fortune  teller,  clairvoyant; 
or  mesmerist. 
Gas  company         

$50.00 
25  00 

$100.00 

Each  performance 

Panorama    or  view  shows  of   pictures, 
statuary,  or  other  works  of  art  through 
stereoscopic  or  magnifying  lenses. 
Each  day 

10.00 
10.00 
500.00 

230.00 
430.00 

Each  performance 

State  tax  pavable  in  each  county  

15.00 
10.00 

35.00 
20.00 
50.00 
25.00 
2.00 

50.00 
30.00 

20.00 

10.00 
50.00 

5.00 
2.00 
5.00 
10.00 
5.00 
36.00 

660.00 
370.  00 

525.00 
90.00 
200.00 
50.00 
1,038.00 

150.00 

do 

In  citv  of  10,000  inhabitants  or  more  
In  city  of  less  than  10,000  inhabitants  
Capacity  of  over  100,000  bushels  

do 

Grain  elevator  

do 

Capacity  from  50,000  to  100,000  bushels  
Each  let  for  hire  not  connected  with  liv- 
ery stable. 
In  citv  of  20  000  inhabitants  or  more 

Hacks,    wagons,    buggies, 
etc. 
Ice  dealer 

do  •  

In  city  of  10,000  and  less  than  20,000  in- 
habitants. 
In  city  of  5,000  and  less  than  10,000  inhabi- 
tants. 
In  city  less  than  5,000  inhabitants 

do 

60.  00 

120.  00 
.  2,  750.  00 

3,  325.  00 
16.00 
2,100.00 
550.00 
10,  020.  00 

do 

Insurance   agent,  general 
adjuster  or  agent. 
Insurance  agent  local 

Insurance  agent,  industrial. 
Land  agent 

If  not  attorneys  

Laundrv  steam 

Lawyer  or  conveyancer. 

Lightning  rods  dealers  in 

Lightning  rods,  canvassers 
for. 
Liquor  dealer  retail 

100  00 

Selling  1  gallon  or  less 

300.00 
300.00 
200.00 

.30 
150.00 

50.00 
100.00 

300.00 
250.00 

200.00 
150.00 
125.00 
60.00 
25.00 
20.00 
12.00 
6.00 

3.00 
100.00 

573,  900.  00 
12,  900.  00 
1,600.00 

2,667.90 
1,  200.  00 

400.00 
300.00 

900.00 
1,  500.  00 

4,200.00 
4,  050.  00 
13,  375.  00 
16,740.00 
14,  700.  00 
12,  680.  00 
19,980.00 
21,063.00 
34,  530.  00 

Liquor  dealer,  wholesale... 
Liquor  dealer  in  local  op- 
tion district. 
Liverv  or  feed  stable 

Selling  1  gallon  or  over  

Selling  1  quart  or  less  on  prescription  of 
regular  practicing  physician. 
Each  stall  and  each  vehicle  

Loan  agent  

From  every  person,  firm,  or  association 
of  person's  loaning  money  as  agent  or 
agents  of  any  corporation,  firm,  or  asso- 
ciation in  this  State  or  out  of  it  an 
annual  tax  of  $150  for  the  State  for  the 
principal  office,  and  county  tax  of  $15 
from  each  agent  for   each  county  in 
which  he  may  do  business,  and  no  addi- 
tional occupation  tax  shall  be  levied 
bv  any  county,  city,  or  town  in  this 
State. 
Traveling 

» 

Medical  specialist,  oculist, 
surgeon,  or  physician. 
Medicine,  patent  or  other  .  . 
Merchants: 
First-class  

Traveling  vendor 

Purchasing  $750,000  or  over  annually  
Purchasing  $500,000  and  less  than  $750,000 
annually. 
Purchasing  $250,000  and  less  than  $500,000 
annually. 
Purchasing  $150,000  and  less  than  $250,000 
annually. 
•  Purchasing  $50,000  and  less  than  $150,000 
annually. 
Purchasing  $25,000  and  less  than  $50,000 
annually. 
Purchasing  $15,000  and  less  than  $25,000 
annually. 
Purchasing  $10,000  and  less  than  $15,000 
annually. 
Purchasing  $5,000  and  less  than  $10,000 
annually. 
Purchasing  $2,000  and  less  than  $5,000  an- 
nually. 
Purchasing  less  than  $3,000  annually  

Second-class  

Third-class  

Fourth-class 

Fifth-class 

Sixth-class  

Seventh-class 

Eighth-  class 

Ninth-class   

Tenth-class  

Eleventh-class 

Selling  bankrupt  stocks, 
etc. 

TEXAS    CORPORATION    TAXES. 

Table  of  occupations  taxed — Continued. 


175 


Series. 

Occupation. 

Specifications.  r 

Tax. 

Amount 
paid  year 
ending 
Apr.  30, 
1900. 

67 
68 

Merchants—  Continued. 
Selling  bankrupt  stocks, 
etc. 
do  

After  first  month  for  each  month  
If  business  is  to  continue  6  months  for 

$20.00 
10  00 



69 

Pawnbroker  

each  month,  in  addition  to  the  $100  for 
the  first  month. 

150  00 

$4  800  00 

70 

Peddlers: 
Foot  .  .  . 

State  tax  payable  in  each  county 

5  00 

1  890  00 

71 

1  horse  or  1  pair  of  oxen. 

...do... 

7  50 

1  642  50 

72 

2   horses  or  2  pair  of 

.  .  .do. 

10  00 

8  150  00 

73 

oxen. 
Boat,  sail  or  other  

...do... 

10  00 

10  00 

74 

Clocks,    agricultural 

do 

250  00 

75 

implements,    stoves, 
ranges,    vehicles, 
washing     machines, 
and  churns. 
Phonograph,  electric    bat- 

25 00 

275  00 

76 

tery,  graphophone,  kine- 
toscope,   cinematograph, 
etc. 
Photograph,  or  other  such 

10  00 

3  180  00 

77 

gallery. 
Pool  seller  

For  each  day  pools  are  sold 

5  00 

1  225  00 

78 

Race  track 

One  mile  or  mnrft  in  length 

100  00 

15  00 

79 

do  

Less  than  1  mile  in  length 

50  00 

50  00 

80 
81 

Racks  —  knife,  cane,  or  doll, 
or  other  like  device. 
Sewing-machine  dealer  

Upon  which  rings  are  pitched  or  balls 
thrown. 

25.00 
15  00 

750.  00 
735  00 

82 

Ship  broker  or  ship  agent 

10  00 

140  00 

83 

Shooting  gallery  

State  tax  payable  in  each  county 

30.00 

240  00 

84 

Skating  rink 

25  00 

25  00 

85 

Street  railroads  

Each  mile  

2.00 

344.58 

86 

87 

Theater,  each  day  
do 

In  city  of  more  than  10,000  inhabitants.  .  . 
In  city  over  5  000  and  not  over  10  000  in- 

5.00 
4  00 

15.00 

88 

do. 

habitants. 
In  citv  over  3  000  and  not  over  5  000  in- 

3 00 

3.00 

89 

do  

habitants. 
In  city  over  1,500  and  not  over  3,000  in- 

2.00 

76.00 

90 

do 

habitants. 
In  city  of  1  500  inhabitants  or  less 

1  00 

281  00 

91 

do  

If  paid  annually  .... 

25.00 

1,  250.  00 

92 

Toll  bridge 

7  00 

14  00 

93 

Wagon  yards 

5  00 

935  00 

94 

Waterworks 

In  city  of  40  000  inhabitants  or  more 

35.00 

140.00 

95 

do 

In  city  of  less  than  10  000  inhabitants 

2(i  00 

820.  00 

Total 

918,  982.  48 

In  1898  the  State  collected  from  this  source  $941,701.08;  of  which  amount  whole- 
sale and  retail  liquor  dealers  paid  $559,600,  beer  dealers  $95,550,  the  remainder, 
$286,551,  being  paid  by  other  occupations  taxed.  While  the  administration  of 
this  law  does  not  appear  to  be  thorough  or  systematic,  the  form  of  taxation  seems 
to  be  generally  satisfactory.  The  tax  is  payable  to  local  collectors. 

The  property  owned  by  those  subject  to  occupation  tax  as  above  set  forth  is,  of 
course,  within  the  fixed  limitations  of  the  law,  subject  to  ad  valorem  taxes  on 
valuations  for  State,  county,  and  municipal  purposes. 

CORPORATIONS. 

The  real  and  personal  property  of  substantially  all  classes  of  corporations  is 
assessed  for  taxation  in  the  several  local  taxing  districts,  the  same  as  other  prop- 
erty, and  subject  to  the  same  inequalities  and  discriminations  in  practice.  This 
is  required  by  the  general  law  framed  in  accordance  with  constitutional  limita- 
tions which  render  modification  in  the  general  property  tax,  and  its  administration 
as  applied  to  corporations,  peculiarly  difficult. 

Various  special  forms  of  taxation  have,  however,  been  adopted  and  applied  to 
different  classes  of  corporations  which  will  be  noted,  the  gross  receipts  tax  appear- 
ing to  be  favored.  Owners  of  shares  of  stock  in  a  corporation  which  is  required 
to  list  or  return  its  capital  and  property  for  taxation  are,  generally  speaking,  not 
required  to  return  such  shares. 


176  INDUSTRIAL    COMMISSION. 

RAILROADS. 

The  method  of  taxing  railroads  in  this  State  is  the  general  property  tax,  pure 
and  simple,  supplemented  by  an  additional  tax  on  gross  receipts. 

The  constitution  provides  that  all  railroad  property  lying  or  being  within  the 
limits  of  any  incorporated  city  or  town  within  the  State,  shall  bear  its  propor- 
tionate share  of  municipal  taxation,  and  further,  that  such  property  shall  be 
assessed  and  taxes  collected  in  the  several  counties  in  which  said  property  is  sit- 
uated, including  so  much  of  the  roadbed  and  fixtures  as  shall  be  in  each  county. 

In  accord  with  these  constitutional  restrictions  the  law  provides  that  every 
railroad  company  shall  deliver  annually  to  the  assessor  of  each  county  and  incor- 
porated town  or  city  a  sworn  statement  of  the  real  estate  owned  and  the  length 
and  value  per  mile  of  the  railroad,  including  the  right  of  way,  roadbed,  super- 
structures, depots  and  grounds,  shops,  fixtures,  and  all  personal  property  except 
rolling  stock,  all  of  which  is  listed  in  the  county  where  situated. 

The  rolling  stock  is  rendered  in  the  county  of  the  principal  office  of  the  company 
valued  and  equalized  by  the  county  commissioners'  court  in  such  county  and 
returned  to  the  State  comptroller  who  apportions  the  value  thereof  to  each  county 
according  to  mileage  of  road.  This  valuation  of  rolling  stock  is  then  assessed  by 
local  assessors  with  the  other  property  of  the  road. 

Lately  an  attempt  has  been  made  to  include  something  of  franchise  values  with 
the  values  of  property  above  referred  to. 

There  appears  to  be  no  uniform  method  among  assessors  for  the  assessment  of 
railroad  property,  each  acting  independently  upon  his  own  discretion.  Such  prop- 
erty is  said  to  be  rendered  at  whatever  the  local  assessor  will  accept,  and  assessed 
at  whatever  the  commissioners'  court  will  agree  to,  the  averages  per  mile  for 
different  roads  ranging,  in  1898,  from  $2,818  to  $1 3,000,  and  usually  at  a  portion  only 
of  its  property  value,  and  for  much  less  than  its  value  based  upon  stock  and  bonds. 

There  is  no  State  board  of  equalization,  and  valuations  of  different  roads  are 
very  unequal,  and  those  of  the  same  road  vary  greatly  in  the  different  counties. 
As  in  the  case  of  individuals  under  the  property  tax,  each  corporation  strives  for 
low  assessments  and  corporations  do  not  seem  to  object  to  this  inequality. 

The  tax  commission  framed  a  bill  providing  for  the  assessment  of  railroad  prop- 
erty upon  the  basis  of  the  market  value  of  stock  and  bonds,  that  being  regarded 
as  a  fair  measure  of  value  as  laid  down  by  the  United  States  Supreme  Court,  to 
be  made  by  local  assessors  as  required  by  the  constitution,  according  to  mileage 
within  their  respective  counties.  This  the  commission  thought  would  be  an 
improvement  upon  the  present  guesswork  at  property  valuations,  the  constitu- 
tional provisions  depriving  the  legislature  of  authority  to  create  a  State  board 
for  that  purpose.  The  bill  proposed,  although  considered  at  the  last  session  of 
the  legislature,  was  not  adopted. 

This  property  tax  is  supplemented  by  a  State  tax  of  1  per  cent  upon  the  gross 
receipts  from  passenger  traffic  within  the  State,  called  an  occupation  tax.  The 
tax  commission  recommended  an  extension  of  the  gross  receipts  tax  to  freight  as 
well  as  passenger  traffic. 

In  1898  the  9,540  miles  of  railway  with  rolling  stock  in  Texas  were  assessed  at 
$71,031,235,  or  an  average  of  $7,445  per  mile. 

On  this  valuation  this  property  paid  to  the  State  in  taxes  the  following  amounts: 

General  State  tax,  20  cents  on  the  $100 _ $142, 062. 47 

State  school  tax,  18  cents  on  the  $100 127,855.22 

One  per  cent  of  passenger  earnings  _  _  _ 47, 004. 37 

Total  to  State 316,922.06 

Adding  to  this  the  amount  of  county  taxes  at  the  average  rate  of  60  cents  on 
each  $100,  amounting  to  $426,187.41,  gives  approximately  the  amount  of  taxes  paid 
by  the  railroads  of  the  State  in  1898,  $743,108.47. 

In  1900  the  number  of  miles  was  9,784,  and  the  total  assessed  value,  including 
rolling  stock,  was  $81,298,283,  being  an  average  of  $8,308  per  mile. 

The  total  passenger  earnings  for  year  ending  August  31,  1900,  were  $5,717,344 
and  the  occupation  tax  thereon  $57,173.44. 

EXPRESS  COMPANIES. 

The  special  tax  imposed  on  express  companies  is  li  per  cent  of  the  gross 
receipts  from  business  arising  and  terminating  within  the  State,  which  is  the 
only  tax  they  pay,  except  an  ad  valorem  tax  on  a  small  amount  of  personal  prop- 
erty, such  as  horses,  vehicles,  and  office  furniture  taxed  locally. 

The  tax  on  gross  receipts  paid  by  these  companies  to  the  State  in  1898  was 
$11,833.31  and  in  1900  $13,936.38. 


TEXAS    COEPOEATION    TAXES.  177 

OTHER  SPECIAL  TAXES. 

Steamboat  and  stage  companies  are  subject  to  a  tax  of  1  per  cent  on  passenger 
earnings. 

Sleeping  car  companies  pay  the  highest  gross  receipts  tax  in  the  State,  being  2| 
percent  on  such  receipts  on  business  done  within  the  State.  They  paid  in  1898 
$3,862.25,  and  in  1900  $4,573.51.  They  also  pay  to  the  State  a  tax  of  one-fourth 
of  1  per  cent  on  the  value  of  their  capital  stock  in  use  in  the  State,  based  upon 
reports  to  the  State  comptroller  of  total  capital  stock,  from  which  is  deducted  the 
value  of  all  property  other  than  rolling  stock,  which  is  valued  according  to  the 
proportion  of  miles  operated  over  within  the  State  to  total  mileage. 

Telegraph  companies  are  taxed  1  cent  on  each  full-rate  message,  and  one-half 
cent  on  each  half -rate  message  originating  and  terminating  in  the  State.  This 
tax  was,  in  1898,  $7,695.67,  and  in  1900,  $7,285.83. 

Telephone  companies  are  taxed  25  cents  per  annum  on  each  instrument  in 
actual  use,  this  tax  amounting  in  1898  to  $2,485.75  and  1900  to  $5,499.35. 

Insurance  companies — life,  fire,  marine,  accident,  and  other  insurance  compa- 
nies— are  taxed  011  gross  receipts  from  business  done  within  the  State.  Each  life 
insurance  company  and  each  life  and  accident  insurance  company  pays  2  per  cent 
on  gross  premium  receipts,  and  each  fire  insurance  company  one-half  of  1  per  cent 
on  gross  premium  receipts;  each  marine,  health,  live  stock,  guarantee,  or  accident 
insurance  company  pays  1  per  cent  on  gross  premium  receipts. 

The  tax  in  1898  was  $100,613.61,  and  in  1900,  $115,455.97. 

Street  car  companies  pay  an  occupation  tax  of  $2  on  each  mile  of  track. 

Gas  companies  pay  an  occupation  tax  of  $35  in  cities  over  10,000,  and  in  smaller 
towns  $20,  and  the  same  rate  is  imposed  on  electric  light  and  water  companies. 
In  1898  electric  light  companies  paid  $1,861,  gas  companies  $306,  and  water 
companies  $1,065. 

The  tax  commission  proposed  the  substitution  of  a  tax  of  one-half  of  1  per  cent 
on  the  gross  receipts  of  these  companies  for  the  occupation  taxes  referred  to,  and 
the  extension  of  the  gross  receipts  tax  to  some  other  classes  of  business. 

The  taxation  of  gross  receipts  is  not  a  new  form  of  taxation  in  this  State,  and 
seemed  to  be  favored  by  the  tax  commission. 

The  various  corporations  and  classes  of  business  paying  special  taxes  as  above 
stated  also  pay  an  ad  valorem  tax  locally  upon  property. 

BANKS. 

The  law  for  the  taxation  of  the  property  of  banks  appears  to  be  loosely  admin- 
istered. The  method  of  listing  and  assessing  such  property  is  for  the  local  assessor 
to  require  from  the  bank  a  list  of  the  shareholders  and  the  number  of  shares 
owned  by  each.  The  real  estate  is  assessed  to  the  bank  and  the  shares  to  the 
individual  holders  thereof.  Complaint  is  made  that  shares  are  not  assessed  at 
their  true  value,  as  the  law  requires,  but  as  a  rule  the  value  of  real  estate  when 
added  to  the  assessed  value  of  the  shares  of  stock  amounts  to  from  about  50  to  75 
cents  on  the  dollar  of  the  par  value  of  the  paid  up  capital,  the  average  being, 
according  to  the  judgment  of  the  tax  commission,  about  65  cents  on  the  dollar  of 
the  par  value  of  the  stock.  It  would  therefore  appear  that  through  this  laxity 
and  discretion  on  the  part  of  assessors  they  have  practically  attained  a  degree  of 
justice  toward  banks  as  compared  with  other  property  that  is  exceptional  in  the 
administration  of  the  general  property  tax  in  American  States. 

The  law  relating  to  the  listing  and  assessing  of  national  banks  requires  a  sworn 
list  of  stockholders,  with  the  name  and  residence  of  each.  Shareholders  are  also 
required  to  render  shares  of  stock  owned  by  them  at  their  actual  value.  This  pro- 
vision is  not  complied  with  as  a  rule,  and  the  law  points  out  no  effective  method  for 
the  ascertainment  by  the  local  assessor  of  the  actual  value,  the  matter  being  left  to 
his  estimate.  The  result  is,  with  regard  to  all  kinds  of  banks,  that,  as  in  the  case 
of  other  kinds  of  property,  but  a  portion  of  the  value  of  property  and  assets  is 
rendered  for  taxation.  When  assessed  this  property  is  taxed  as  other  local  and 
personal  property.  The  tax  commission  gave  this  subject  careful  consideration, 
and  proposed  and  formulated  a  law  to  provide  a  way  by  which  the  assessing  offi- 
cer could  ascertain  the  full  and  true  value  of  this  class  of  property,  but  no 
legislative  action  has  yet  been  taken  upon  it. 

That  assessors  fail  to  reach  and  assess  the  large  sums  of  money  deposited  in 
banks  and  held  by  taxable  citizens  is  vigorously  set  forth  in  the  report  of  the  tax 
commission,  which  gives  the  amount  of  individual  deposits  in  the  National 
banks  of  Texas,  as  shown  by  the  reports  made  to  the  controller  of  the  currency, 

12 


178  INDUSTRIAL    COMMISSION. 

June  30,  1899,  as  $44,564,956.54,  and  in  December,  1897,  $41,328,131.81,  while  the 
money  rendered  for  taxation  in  1898  by  individuals  in  the  entire  State  was  only 
$5,864,416.  This  does  not  take  into  consideration  the  deposits  with  the  167  private 
banks  and  bankers  in  the  State,  so  that  "it  is  safe  to  say  that  not  one  dollar  of 
money  out  of  ten  in  Texas  is  listed  for  taxation." 

The  resources  of  some  of  the  national  banks  in  some  of  the  cities  of  the  State 
exceed  the  total  valuation  for  taxes  of  personal  property  in  the  counties  where 
Budh  cities  are  located. 

There  are  instances,  it  is  said,  of  the  rendition  of  money  for  taxation  at  50  cents 
on  the  dollar  which  have  been  accepted  and  approved  by  the  commissioners' 
court  after  due  discussion  of  the  question.  This  is  referred  to  by  the  tax  com- 
mission as  strongly  illustrating  the  inequalities  of  valuation  for  taxation  in  the 
State. 

The  commissioners  proposed  laws  providing  for  discovery  and  valuation  of  such 
property  for  taxation,  and  said: 

' '  If  those  who  have  money  and  wealth  and  good  dividend-paying  securities  can 
be  reached  for  taxation,  there  will  be  no  trouble  about  the  other  property  holders 
coming  up  with  their  share  of  the  debt  of  highest  obligation." 

They  also  cite  the  phillipic  of  ex-President  Harrison  against  the  evasions  and 
frauds  of  holders  of  intangible  securities.  The  commission,  however,  seem  to 
fail  to  grasp  the  fact  that  the  defects  referred  to  and  remedial  difficulties  are 
inherent  in  the  general  property  tax  system. 

INCORPORATION  AND  FRANCHISE  TAXES. 

Every  domestic  corporation  chartered  before  the  passage  of  the  recent  franchise 
act  is  required  to  pay  to  the  Secretary  of  State  an  annual  franchise  tax  of  $10,  and 
every  such  corporation  chartered  after  the  passage  of  this  act  is  required  to  pay 
$10  on  incorporation,  and  in  each  succeeding  year  an  amount  graduating  as 
follows: 

When  capital  stock  is — 

Between  $50,000  and  $100,000 $20 

Between  $100,000  and  $200,000  ... 30 

Over  $200,000 50 

Foreign  corporations  authorized  to  do  business  prior  to  the  passage  of  a  recent 
act  are  annually  required  to  pay  $25  when  their  capital  stock  is  $25,000  or  less, 
and  $100  when  their  capital  stock  is  between  $25,000  and  $100,000.  All  foreign 
corporations  authorized  to  do  business  in  the  State  after  the  passage  of  this  act 
are  required  to  pay  an  annual  franchise  tax  of  $50  when  that  capital  stock  does 
not  exceed  $100,000,  and  in  addition  thereto  a  tax  of  $1  on  every  $10,000  of  capital 
stock  in  excess  of  $100,000,  but  not  exceeding  $1,000,000. 


SUPPLEMENTARY  REPORT 


ON   THE 


TAXATION  OF  CORPORATIONS  IN  MICHIGAN. 

[Prepared  under  the  direction  of  the  Industrial  Commission  by  GEORGE  CLAP- 

PERTON,  expert  agent. 


Since  the  report  on  taxation  in  Michigan  was  prepared  there  have  been  some 
important  developments  in  the  experience  of  that  State  which  are  of  special  inter- 
est wherever  taxation  reform  commands  attention. 

Michigan  may  be  said  to  be  passing  through  a  transition  period  in  taxation,  or, 
as  it  has  been  designated,  "  an  epidemic  of  equal  taxation."' 

The  work  of  the  State  board  of  tax  commissioners  during  the  year  1900,  in 
increasing  the  valuations  of  real  and  personal  property  taxed  under  the  general 
law  of  the  State,  has  been  referred  to.  The  total  increase  in  such  property  valu- 
ations in  1900  over  1899  was  $349,260,941,  the  increase  of  realty  valuation  being 
$180,594,302,  and  of  personalty  $168,666,639.  The  increase  in  property  valuations 
both  real  and  personal  in  1900  over  those  of  1896  was  $212,450,028.  This  increase 
is  in  property  coming  under  the  general  property  tax,  and  assessed  and  valued 
by  the  usual  methods. 

According  to  the  report  of  the  State  board  of  tax  commissioners  for  1900,  just 
issued,  the  total  assessed  valuation  of  property,  real  and  personal,  under  the  gen- 
eral law,  was  $1,317,450,028,  divided  as  follows: 

Real  estate $1,006,453,013 

Personalty 310,997,015 

The  manner  in  which  this  materially  increased  assessment  was  distributed  is  shown 
by  the  following  table: 


Classes  of  property. 

1899. 

1900. 

Real  estate,  whole  State  

$825,  858,  711 

$1,  006,  453,  013 

Real  estate  of  1  202  corporations  .                     

61,882,911 

133,  808,  918 

Real  estate  of  67  mining1  corporations 

52,142  063 

120,261,072 

Personal  property,  whole  State  

142,  330,  376 

310,  997,  015 

Personal  property  of  1,202  corporations               

20,  670,  101 

52,111,867 

Personal  property  of  67  mining  corporations 

4,060  894 

11,396,028 

Total  real  and  personal  property,  whole  State  

968,  189,  087 

1,317,450,028 

Real  and  personal  property  of  1  202  corporations          

82,  553,  012 

185,  920,  785 

Real  and  personal  property  of  67  mining  corporations 

56,  202,  964 

135,  717,  994 

An  examination  of  the  assessed  valuation  of  property  in  the  cities  of  the  State  for 
the  years  1899  and  1900  discloses  the  fact  that  the  increase  in  the  value  of  real  estate 
in  such  cities  for  1900  over  1899  was  $45,347,232,  while  the  increase  in  personalty  was 
$87,309,936,  making  a  total  increase  of  valuation  in  the  78  cities  of  the  State  of 
$132,657,168.  A  further  comparison  shows  that  for  the  year  1900  the  percentage  of 
increase  in  the  assessed  valuations  of  real  estate  in  1900  over  that  of  1899  was  22, 
while  that  of  personal  property  was  119. 

The  total  taxes  for  1900  upon  these  property  valuations  under  the  general  law 
were  $20,380,532.86,  or  $111,503.31  less  than  in  1899;  the  sum  of  $15,380,063.88 
being  derived  from  real  estate,  and  $5,000,468.98  from  personalty.  The  percentage 
of  this  total  tax  derived  from  real  estate  was  75.465,  and  from  personalty  24.536, 
and  the  average  rate  of  taxation  per  $1 ,000  of  assessed  valuations  was  substantially 
$15.47. 

179 


180  INDUSTRIAL    COMMISSION. 

The  percentages  of  total  taxes  derived  from  real  estate  are  shown  to  be  85.336 
in  1891).  and  75,405  in  1900,  and  from  personal  property  14.664  in  1899,  and  24.536  in 
1900.  The  rate  of  taxation  is  shown  to  be  $21.165  in  1899,  and  $15.47  in  1900  on 
each  $1,000  of  valuation,  presumably  ascertained  by  the  same  methods  of  com- 
putation. It  will  be  remembered  that  it  was  shown  in  the  original  report  for 
this  State  that  the  rate  of  taxation  ascertained  by  the  method  of  computation 
employed  in  the  auditor-general's  office  in  1896  was  substantially  $17.60  per  $1,000 
of  valuation. 

The  increase  in  enrollment  and  assessment  of  intangible  personalty,  such  as 
money,  mortgages,  bonds,  stock,  etc.,  by  the  State  board  in  1900  over  previous 
years  was  very  great,  especially  in  the  cities.  These  increased  assessments  were 
marked  by  great  inequality.  As  a  result  of  such  increase  there  is  general  com- 
plaint and  denunciation  of  the  laws  and  methods  employed  by  the  commissioners 
on  the  part  of  the  owners  of  such  property,  which  had  theretofore  largely  escaped 
taxation.  It  is  contended  on  their  part  that  there  is  great  inequality  and  dis- 
crimination in  the  discovery  and  assessment  of  this  class  of  property;  that  the 
portions  of  such  property  found  and  enrolled  were,  because  of  excessive  valua- 
tions as  compared  with  other  property,  and  taxation  at  local  rates,  disproportion- 
ately and  excessively  taxed;  and  that  in  consequence  capital  arid  capitalists  are 
removing  from  the  State  to  an  alarming  extent,  and  that  the  course  pursued  by 
the  commissioners  under  present  laws  in  this  regard,  if  continued,  will  seriously 
jeopardize  the  business  and  prosperity  of  the  State. 

On  the  other  hand,  it  is  claimed  by  the  board  that  inasmuch  as  the  year  1900 
was  the  beginning  of  its  work  in  this  direction,  it  was  necessarily  imperfect  and 
incomplete,  resulting  in  more  or  less  inequality;  but  that  if  it  is  permitted  to 
continue  its  work  in  respect  to  assessment  and  valuation  of  property  under  the 
general  law,  it  will  be  able  with  additional  knowledge  and  experience  to  subject 
a  much  larger  portion  of  property  to  assessment,  and  secure  greater  equality  in 
valuations,  so  that  there  will  eventually  be  such  increased  assessment  and  correct 
valuations  as  will  so  reduce  the  rates  of  taxation  on  all  property  that  none  will 
be  excessively  burdened. 

There  appears,  however,  to  be  a  growing  sentiment  among  the  people,  in  view 
of  this  experience  and  more  careful  consideration  of  the  subject,  in  favor  of  a 
greater  restriction  of  the  general  property  tax,  and  the  adoption  of  special 
methods  of  taxation  for  intangible  personalty  and  some  other  forms  of  property. 

The  theory  and  purpose  of  the  State  board  of  tax  commissioners,  according  to 
the  report  for  1900,  seems  to  be  to  "  improve  "  the  general  property  tax  and  sub- 
ject all  forms  of  property  taxed  under  the  general  law  to  assessment  at  full  cash 
value  and  uniform  rates;  and  the  board  expresses  considerable  confidence  in  its 
ability  to  eventually  perform  that  task. 

CONSTITUTIONAL  AMENDMENTS. 

The  provisions  and  fate  of  the  so-called  Atkinson  bill  providing  for  the  taxation 
of  railroads  and  other  quasi-public  corporations  have  been  referred  to  in  detail. 
The  act  was  practically  declared  unconstitutional,  because  in  some  of  its  provi- 
sions it  was  in  violation  of  the  principle  of  uniformity  applicable  to  all  property 
taxed  under  the  general  law.  This  bill  was  the  favorite  measure  of  Governor 
Pingree,  whose  conception  of  equal  taxation,  to  which  his  administration  was 
positively  committed,  appeared  to  be  a  universal  property  tax  at  uniform  valua- 
tion and  uniform  rates;  and  he  had,  against  bitter  opposition,  directed  all  the 
force  and  energy  of  his  administration  for  years  to  secure  its  enactment.  When 
the  bill  which  had  characterized  his  administration  was  thus  held  unconstitu- 
tional, he  determined  to  legalize  the  method  of  taxation  it  provided  by  special 
constitutional  provision.  To  this  end  he  convened  the  State  legislature  in  special 
session  a  few  days  before  the  general  election  of  1900,  for  the  avowed  purpose  of 
submitting  to  a  vote  of  the  people  amendments  to  the  constitution  permitting  the 
'•'enactment  of  laws  that  will  provide  for  the  equal  taxation  of  all  property  by  an 
assessment  of  the  same  at  its  actual  cash  value."  Convened  at  such  a  time,  the 
legislature,  in  view  of  existing  political  exigencies  and  the  general  sentiment  that 
had  been  created  among  the  people  of  the  State  in  favor  of  the  abstract  principle 
of  "  equal  taxation,"  hastily  and  without  due  consideration  submitted  to  popular 
vote  the  amendments  embodying  the  demands  of  the  governor,  which  were  car- 
ried by  a  large  majority  of  the  votes  cast  upon  them.  These  amendments  main- 
tain the  legislature's  authority  to  provide  for  specific  taxes  on  corporations,  and 
also  vest  in  that  body  authority  to  provide  for  the  assessment  of  the  property  of 
corporations  at  its  true  cash  value  by  a  State  board  and  for  levying  taxes  thereon, 
and  expressly  direct  "  that  the  legislature  shall  provide  a  uniform  rule  of  taxa- 


-UNIVERSITY 

MICHIGAN    CORPORATION    TAXI$|.    "  181 

tion  for  such  property  as  shall  be  assessed  by  a  State  board  of  assessors,  and  the 
rate  of  taxation  upon  such  property  shall  be  the  rate  which  the  State  board  of 
assessors  shall  ascertain  and  determine  is  the  average  rate  levied  upon  other 
property  upon  which  ad  valorem  taxes  are  assessed  for  State,  county,  township, 
school,  and  municipal  purposes."  The  governor,  evidently  construing  the  adop- 
tion of  these  amendments  to  be  an  expression  of  the  popular  will  in  favor  of  the 
abolition  of  the  specific  tax  system  in  vogue,  and  the  extension  of  the  general 
property  tax  in  modified  form  to  corporations  paying  specific  taxes,  again  con- 
vened the  legislature  in  special  session  in  December,  1900,  and  directed  all  the 
force  and  pressure  of  the  executive  toward  the  enactment  of  laws  that  should 
embody  the  alternative  method  prescribed  for  the  taxation  of  railroad,  express, 
telegraph,  and  telephone  companies.  The  legislature,  however,  not  being  in 
accord  with  the  views  of  the  governor  and  being  averse  to  hasty  legislation  upon 
so  important  a  subject,  refused  to  enact  such  laws,  deferring  action  upon  the 
subject  until  the  then  incoming  legislature  should  convene  in  regular  session 
under  a  new  administration. 

Thus  the  administration  of  Governor  Pingree,  committed  to  the  cause  of  "  equal 
taxation"  through  one  uniform  tax  on  property  values,  ended  without  achieving 
any  practical  results  in  State  legislation  upon  the  subject.  It  succeeded,  how- 
ever, in  securing  the  adoption  of  the  restrictive  constitutional  amendments 
referred  to,  which  give  the  legislature  power  to  extend  the  general  property  tax 
to  quasi-public  corporations  through  "uniform  valuation"  and  "average"  rates 
of  taxation;  but  these  amendments  are  regarded  by  many  intelligent  people  of  the 
State  as  likely  to  impede  modern  and  progressive  legislation  upon  the  subject  of 
taxation  and  delay  progress  toward  the  attainment  of  t;  equal  taxation"  in  fact. 

The  legislature  of  1901,  in  session  at  this  writing,  have  under  consideration 
several  bills  providing,  through  various  methods,  for  the  substitution  of  an  ad 
valorem  tax  for  the  existing  specific  tax  upon  the  earnings  of  railroads  and  other 
quasi-public  corporations.  While  there  is  a  strong  popular  sentiment  throughout 
the  State  in  favor  of  such  ad  valorem  taxes,  there  is  also  positive  and  intelligent 
opposition  to  a  change  in  the  existing  specific  tax  method. 

Through  years  of  agitation  equal  taxation  has  become  a  "  paramount  issue  "  in 
Michigan,  the  people  of  the  State  being  divided  thereon  into  2  opposing  forces, 
one  contending  for  one  rule  and  one  method  of  taxation  applied  to  all  property  as 
essential  to  equal  and  uniform  taxation,  the  other  contending  for  diversified 
methods  adapted  to  special  forms  of  wealth  as  essential  to  the  attainment  of  the 
desired  result,  and  insisting  that  the  methods  proposed  for  the  extended  applica- 
tion of  the  general  property  tax  would  be  conducive  to  unequal  taxation  in  prac- 
tice. While  there  is  no  division  upon  the  abstract  principle  of  equal  taxation, 
there  is  active  conflict  as  to  the  methods  for  the  attainment  of  the  desired  result. 

VALUATION  OF  MICHIGAN  RAILROADS. 

The  act  creating  a  board  of  State  tax  commissioners  declared  one  of  the  duties 
of  that  board  to  be  "  to  inquire  into  and  ascertain  the  valuation  of  the  property 
of  corporations  paying  specific  taxes,  and  to  ascertain  the  actual  rate  of  taxation, 
as  based  upon  the  valuation  of  said  properties,  that  is  paid  by  said  corporations," 
in  order  to  determine  whether  such  property  pays  upon  its  true  value  a  rate  equal 
to  the  rate  paid  by  property  taxed  under  the  general  law.  By  virtue  of  this 
authority  the  board  has  undertaken  to  secure  an  accurate  appraisement  of  the 
property  of  railroad,  telephone,  telegraph,  and  express  companies  in  the  State. 
Prof.  M.  E.  Cooley,  of  the  engineering  faculty  of  the  University  of  Michigan,  was 
employed  to  supervise  the  work  of  valuing  the  "tangible  property"  of  these  cor- 
porations, and  Prof.  Henry  C.  Adams,  of  the  same  university,  to  determine  the 
value  of  their  "immaterial"  or  "intangible"  property.  Each  of  these  men  was 
provided  with  an  able  corps  of  expert  assistants,  most  of  whom  were  civil  engi- 
neers, graduated  from  engineering  colleges  or  technical  schools,  some  15  institu- 
tions being  represented  in  this,  perhaps,  the  most  elaborate  attempt  to  determine 
property  values  of  railroads,  etc.,  ever  made.  Prof.  M.  E.  Cooley,  M.  Am.  Soc. 
M.  E.,  as  appraiser,  was  the  head  of  the  entire  force,  and  the  principal  other  mem- 
bers of  the  staff  were  Henry  E.  Riggs,  M.  Am.  Soc.  C.  E.,  of  Toledo,  Ohio,  chief 
inspector  in  charge  of  civil  engineeing;  T.  H.  Hinchman,  jr.,  M.  Am.  Soc.  M.  E., 
Detroit,  chief  inspector  in  charge  of  mechanical  engineering:  D.  Farrand  Henry, 
M.  Am.  Soc.  C.  E.,  Detroit,  chief  inspector  of  plank  roads  and  river  improvement 
companies;  William  S.  Conant,  M.  Am.  Soc.  M.  E.,  Detroit,  chief  inspector  of  tele- 
graphs; William  J.  Rice,  New  York,  chief  inspector  of  telephones;  Herbert  C. 
Sadler,  M.  Inst.  Nav.  Arch,  and  Marine  Engrs.,  chief  inspector  of  vessel  proper- 
ties; F.  G.  Susimihl,  of  Michigan,  architect. 


182 


INDUSTKIAL    COMMISSION. 


The  final  settleinen  'of  various  questions  and  knotty  points  which  arose  in 
formulating  the  basis  for  the  valuation  of  certain  items,  together  with  a  review 
of  the  methods  and  final  results,  was  entrusted  to  a  special  board  of  review,  com- 
posed of  Messrs.  Octave  Chanute,  of  Chicago;  Charles  Hansel,  of  New  York; 
Prof.  Charles  E.  Greene,  of  Ann  Arbor,  and  Col.  G.  W.  Vaughn,  of  Chicago,  all 
of  whom  are  members  of  the  American  Society  of  Civil  Engineers,  and,  not  having 
been  engaged  in  the  detail  work,  were  presumably  able  to  take  a  broad  view  of 
theinatters  submitted  to  them. 

While  the  detailed  report  of  these  appraisements  has  not  yet  been  published, 
we  are  able  from  information  obtained  to  present  the  general  result  of  the  work 
with  respect  to  railroad  property.  The  work  of  appraisement  covered  a  period  of 
5  months,  being  commenced  in  September,  1900,  with  54  men.  In  October  there 
were  88  men  employed,  in  November  111,  in  December  98,  and  in  January,  1901, 51. 
The  total  cost  of  the  appraisement  was  about  $57,000. 

The  method  adopted  for  determining  the  value  of  the  "  physical  property  "  of  a 
railroad  was  to  estimate  by  special  "field  inspection"  the  value  of  the  separate 
items  of  property  composing  it,  which  when  combined  were  assumed  to  constitute 
the  true  value  of  its  entire  property.  The  appraisers  first  determined  the  "cost 
of  reproduction "  of  the  various  constituent  parts  of  the  propetty  of  a  railroad, 
such  reproduction  value  representing  what  it  would  cost  to  build  a  road  of 
entirely  new  materials  and  labor  where  the  road  exists,  even  to  the  extent  of  cov- 
ering the  cost  of  surveys,  right  of  way,  legal  expenses,  interest,  etc.,  as  shown 
by  the  following  summary  form,  and  then  by  suitable  reductions  the  "present 
value  "  was  determined,  taking  into  consideration  the  depreciation  of  the  elements 
due  to  wear: 

SUMMARY. 
MICHIGAN  RAILROAD  APPRAISAL. 

Mileage. 

Main  line 

Branches 

Spurs  and  sidings    

Railroad  No. .       Gage .       Value  of  physical  properties —       — . 

Costofrepro-     Present 
duction.          value. 

1.  Engineering  (4  per  cent  items  2  to  25,  inclusive,  and  33) 

2.  Right  of  way  and  station  grounds 

3.  Real  estate 

4.  Grading 

5.  Tunnels 

6.  Bridges,  trestles,  and  culverts 

7.  Ties  (cross  and  switch  ties) I. 

8.  Rails 

9.  Track  fastenings ! . 

10.  Frogs,  switches,  and  crossings j . 

11.  Ballast 

12.  Track  laying  and  surfacing . 

13.  Fencing 

14.  Crossings,  cattle  guards,  and  signs 

15.  Interlocking  and  signal  apparatus I . 

16.  Telegraph,  (30)  telephones I . 

17.  Station  buildings  and  fixtures 

18.  Shops,  roundhouses,  and  turntables 

19.  Shop  machinery  and  tools 

20.  Water  stations 

21.  Fuel  stations I . 

22.  Grain  elevators 

23.  Warehouses 

24.  Docks  and  wharves 

25.  Miscellaneous  structures 

26.  Locomotives 

27.  Passenger  equipment 

28.  Freight  equipment 

29.  Miscellaneous  equipment 

31.  Ferries  and  steamships 

32.  Electric  plant 

33.  Terminals 

34.  Legal  expenses  (0.5  per  cent  items  2  to  25,  inclusive,  and  33) 

35.  Interest  (3  per  cent  items  1  to  34,  inclusive) 

qfi   MiqppllflTiPmKj  PYnpnop*  /Organization,  1.5  per  cent 

ses' (Contingencies,  10  per  cent 

Total  cost  of  construction  and  equipment 

37.  Stores  and  supplies .' 


MICHIGAN    CORPORATION   TAXES.  183 

The  investigations  of  this  "physical  property  "  required  the  appraisers  to  cover 
57,000  square  miles  of  Michigan  territory  and  traverse  10.000  miles  of  railway 
track,  every  mile  of  which  was  actually  inspected,  as  were  the  engines,  car  shops, 
machinery,  and  other  physical  property. 

The  valuation  gave,  in  the  first  place,  the  estimated  value  of  each  item  as  new 
work,  material,  or  equipment,  each  item,  however,  being  given  a  percentage  mark 
for  "  condition  representing  the  relation  which  the  actual  existing  value  bears  to 
the  estimated  value  for  renewal  or  replacement."  In  estimating  the  cost  of  the 
individual  items  the  market  price  or  an  average  price  for  a  term  of  years  was 
used,  according  to  circumstances,  but  no  attempt  was  made  to  ascertain  or  use  the 
actual  cost  price  paid  by  the  railways. 

The  values  of  real  estate  and  rights  of  way  were,  we  understand,  determined 
largely  by  estimate  based  upon  such  information  as  the  appraisers  were  able  to 
obtain. 

It  will  be  seen  that  the  criterion  of  values  adopted  was  the  present  cost  of  the 
various  constituent  parts  with  estimated  reductions  for  depreciation,  and  includ- 
ing various  estimated  expenses  that  might  be  incurred  in  procuring  and  putting 
them  into  combined  operation  as  a  railroad. 

It  is  claimed  by  railroad  managers  and  owners,  who  as  a  class  have  ceased  to 
regard  this  method  as  affording  a  reliable  criterion  of  the  value  of  a  railroad,  that 
"the  value  of  such  separate  items  of  property,  the  combination  of  which  consti- 
tute a  railroad  do  not  necessarily  or  even  prima-facie  represent  the  actual  value 
of  the  combination,  the  railroad  as  a  single  entity." 

It  is  said  that  the  great  variation  in  the  mileage,  cost  of  construction,  and  the 
avails  of  operation  discredit  such  methods  of  valuation  for  business  purposes  and 
render  them  unreliable  for  purposes  of  taxation.  It  is  argued  that  the  constitu- 
ent elements  of  a  railroad  possess  little  stable  value  when  disassociated  from  their 
earning  capacity  in  combined  operation  as  a  unit. 

While  the  State  board  of  tax  commissioners  apparently  regards  this  laborious 
appraisement  as  forming  a  reliable  basis  of  valuation  for  taxation,  or  at  least  as 
a  basis  of  comparison  with  the  taxation  of  other  forms  of  property,  railroad  men 
seem  to  reject  such  methods  and  regard  the  results  as  unreliable  for  any  purpose. 

Even  though  this  elaborate  appraisement  of  the  physical  values  of  constituent 
parts  of  a  railroad  property  should  be  accepted  as  a  reliable  basis  of  valuation  for 
purposes  of  taxation,  another  difficulty  arises  in  the  minds  of  taxpayers  as  to  the 
practical  attainment  of  "  equal  taxation  "  in  the  failure  of  local  assessors  to  value 
all  other  forms  of  property  with  the  same  degree  of  skill  and  accuracy. 

Thus,  while  the  appraisement  may  justly  be  regarded  as  the  most  elaborate 
attempt  ever  made  to  ascertain  the  actual  value  of  railroad  property,  of  great 
importance  for  many  purposes  and  perhaps  of  great  benefit  in  the  solution  of  the 
problem  of  equal  taxation  of  such  property  with  property  in  general,  its  practical 
value  and  reliability  for  purposes  of  taxation  are  still  matters  of  conjecture  and 
dispute  in  the  State  where  the  appraisal  was  made. 

NONPHYSICAL  PROPERTY. 

In  connection  with  this  value  of  physical  property  is  taken  what  Professor 
Adams  has  designated  as  the  '"  nonphysical"  property.  In  his  preliminary  report 
he  indicates  some  of  the  elements  of  this  nonphysical  property  of  a  railroad,  as 
follows: 

"  It  is  submitted  that  this  nonphysical  or  immaterial  element  is  not  a  simple 
commercial  element,  but  includes,  among  other  things,  the  following: 

"1.  It  includes  the  franchise — 

"a.  To  be  a  corporation. 

"  b.  To  use  public  property  and  employ  public  authority  for  corporate  ends. 

"2.  It  includes  the  possession  of  traffic  not  exposed  to  competition,  as,  for  exam- 
ple, local  traffic. 

' k  3.  It  includes  the  possession  of  traffic  held  by  established  connections,  although 
exposed  to  competition,  as,  for  example,  through  traffic  that  is  secured  because 
the  line  in  question  is  a  link  in  a  through  route. 

"4.  It  includes  the  benefit  of  economies  made  possible  by  increased  density  of 
traffic. 

"5.  It  includes  a  value  on  account  of  the  organization  and  vitality  of  the  indus- 
tries served  by  the  corporation  as  well  as  of  the  organization  and  vitality  of  the 
industry  which  renders  the  service;  this  value  consequently  is,  in  part,  of  the 
nature  of  an  unearned  increment  to  the  corporation." 

Upon  this  theoretical  and  ingenious  classification,  Professor  Adams  proceeds  to 
work  out  the  "  immaterial "  or  "  intangible  "  values  of  the  railroad  property  of  the 


184  INDUSTRIAL    COMMISSION. 

State,  which,  together  with  the  "physical"  values  determined  by  Professor 
Cooley,  are  assumed  by  the  State  board  of  tax  commissioners  to  represent  the 
actual  value  of  railroad  property  for  purposes  of  taxation.  The  classification 
and  methods  pursued  by  Professor  Adams  in  this  regard  are  unique,  and  have 
created  intense  interest  and  discussion  throughout  the  State.  These  processes 
receive  the  emphatic  commendation  of  those  who  favor  the  application  of  one 
uniform  rule  of  valuation  and  one  uniform  rate  of  taxation  to  all  property,  and 
advocate  an  increased  tax  upon  quasi-public  corporations  through  the  ad  valorem 
method.  They  contend  that  all  these  elements  possess  value  to  their  owners  and 
should  be  taxed  upon  an  equality  with  other  property. 

On  the  other  hand,  while  the  classification  referred  to  would  naturally  excite 
interest  and  criticism  among  representatives  of  railroads  under  any  circumstances, 
when  the  proposition  is  made  to  include  such  elements  as  a  basis  of  valuation 
upon  which  to  levy  taxes  at  the  same  rates  applied  to  other  property  under  the 
general  property  tax  system,  the  effect  upon  such  interests  is  somewhat  start- 
ling, and  provokes  severe  inspection  and  criticism.  It  is  declared  that  such  ele- 
ments as  "benefit  of  economies  made  possible  by  increased  density  of  traffic," 
"  organization  and  vitality  of  the  industry  which  renders  the  service,"  or  in  other 
words,  industry,  ability,  and  thrift,  are  equally  applicable  to  many  other  kinds  of 
business  and  income,  producing  property  of  corporations  and  natural  persons;  but 
that  the  suggestion  that  they  be  included  in  their  valuation  for  taxation  has  never 
been  made  and  would  not  and  could  not  be  considered  or  tolerated  at  all.  Such 
classification  of  "  nonphysical"  values  in  connection  with  the  crude  general  prop- 
erty tax  rates  is  regarded  by  men  of  experience  in  railway  management  as  imprac- 
tical and  a  basis  for  extortionate  taxation.  It  is  contended  that  the  fallacy  of 
including  these  various  elements  of  nonphysical  value,  which,  if  based  on  any- 
thing, are  based  upon  earning  power  as  a  basis  of  taxation,  rather  than  the  earn- 
ings themselves,  is  apparent:  that  as  a  basis  of  comparison  with  other  property 
valuations  under  the  prevailing  system,  it  is  misleading  and  unfair;  and  as  a  basis 
for  "  equal  taxation,"  delusive  and  inequitable. 

There  is  clearly  considerable  force  to  these  criticisms  and  arguments.  Mr.  Adams 
himself  says  that  ' '  the  task  of  appraising  railway  properties  undertaken  by  this 
commission  is  akin  to,  if  not  identical  with,  the  revaluation  of  railway  securities, 
should  this  become  necessary  for  reorganization  or  for  transfer."  While  this  state- 
ment may  be  received  in  justification  of  the  classification  of  elements  of  nonphys- 
ical values,  such  classification  may  be  regarded  as  a  practical  demonstration  of  the 
futility  of  comparing  an  earnings  tax  with  the  general  property  tax,  and  of  the 
attempt  to  subject  all  modern  forms  of  property  to  one  uniform  tax  upon  value. 

Mr.  Adams,  although  faithfully  trying  to  perform  the  difficult  task  undertaken 
by  the  State  commission  under  the  direction  of  the  law,  recognizes  earning  power 
of  a  corporation  of  this  character  as  ' '  undoubtedly  the  basis  of  all  valuation  of 
corporate  properties,"  and  that  "it  is  the  income  account  from  which  this  earn- 
ing power  can  be  determined." 

After  constructing  this  unique  classification  of  "nonphysical"  values  and  sus- 
taining their  existence  by  reference  to  the  practice  of  corporations  with  respect 
to  revaluation,  and  rules  of  courts  in  certain  instances;  discarding  statements  of 
assets  and  liabilities,  cost  of  property,  and  par  or  market  value  of  stocks  and  bonds 
as  unsatisfactory  for  the  purpose  of  the  commission,  and  recognizing  earning 
power  as  shown  by  railroad  accounting  as  an  acceptable  basis  for  appraisal  of  such 
values,  Professor  Adams  formulates  a  rule  "  for  the  appraisal  of  the  immaterial 
values  of  railway  properties,"  or  what  he  terms  "  the  capitalization  of  corporate 
organization  and  business  opportunity,"  as  follows: 

"1.  Begin  with  gross  earnings  from  operation,  deduct  therefrom  the  aggregate 
of  operating  expenses,  and  the  remainder  may  be  termed  the  'income  from  oper- 
ation.' To  this  should  be  added  '  income  of  corporate  investments,'  giving  a  sum 
which  may  be  termed  '  total  income,'  and  which  represents  the  amount  at  the  dis- 
posal of  the  corporation  for  the  support  of  its  capital  and  for  the  determination 
of  its  annual  surplus. 

"2.  Deduct  from  the  above  amount,  that  is  to  say, '  total  income,'  as  an  annuity 
properly  chargeable  to  capital,  a  certain  per  cent  of  the  appraised  value  of  the 
physical  properties. 

"  3.  From  this  amount  should  be  deducted  rents  paid  for  the  lease  of  property 
operated  and  permanent  improvements  charged  directly  to  income.  The  remain- 
der wo  aid  represent  the  surplus  from  the  gross  earnings  from  the  year's  operations, 
and  for  the  purpose  of  this  investigation  may  be  accepted  as  an  annuity  which, 
capitalized  at  a  certain  rate  of  interest,  gives  the  true  value  of  immaterial 
properties. 


MICHIGAN    CORPORATION    TAXES.  185 

"7.  To  obviate  the  criticism  that  both  gross  and  net  earnings  vary  from  year 
to  year,  it  is  suggested  that  in  place  of  a  single  year's  income  account,  the  average 
income  account  of  a  period  of  10  years  be  accepted  as  the  basis  of  computation. 
The  reason  for  accepting  a  period  of  10  years  is  that  under  existing  commercial 
conditions  it  is  likely  that  the  corporation  whose  property  is  appraised  would 
during  that  period  pass  through  years  of  both  prosperity  and  adversity. 

"8.  It  will  be  observed  that  the  above  rule  fails  to  appraise  the  speculative 
element  in  railway  property.  While  this  element  doubtless  affects  the  price 
of  corporate  stocks  and  corporate  bonds,  it  is  not  entirely  clear  that  it  should 
influence  appraisals  for  the  purpose  of  taxation.  Should,  however,  the  commis- 
sion desire  to  compute  the  present  worth  of  property,  as  resting  upon  expectations 
in  the  future  as  well  as  upon  earnings  in  the  past,  the  pertinency  of  the  above 
rule  would  not  thereby  be  impaired.  This  is  true  because  the  speculative  value 
of  properties  must,  from  the  nature  of  the  case,  be  a  modification  of  their  value 
computed  upon  the  basis  of  their  earning  capacity." 

We  are  advised  that  the  "  certain  per  cent"  referred  to  as  a  basis  of  capitaliza- 
tion in  the  foregoing  rule  was  4  per  cent,  that  being  regarded  as  a  proper  crite- 
rion for  the  purpose  for  which  it  is  employed. 

While  it  is  possible  that  this  theoretical  method  applied  to  all  income-producing 
property  and  business  of  corporations  and  natural  persons  throughout  the  State 
might  evolve  "  equal  taxation,"  we  apprehend  that  the  suggestion  of  such  a  uni- 
versal application  would  not  commend  itself  to  general  public  esteem.  Certainly 
its  rigid  application  as  a  basis  of  valuation  to  one  class  of  property  upon  which 
is  to  be  levied  the  "  average  rate  "  of  taxation,  while  all  other  property  is  assessed 
under  the  general  property  tax,  would  result  in  taxation  unequal  in  the  extreme. 

When  this  complicated  and  expensive  process  is  followed  out,  the  fact  remains 
that  a  tax  based  upon  such  valuations  is  nothing  more  or  less  than  a  tax  upon 
income,  and  its  use  would  transform  the  general  property  tax,  with  respect  to 
one  class  of  property,  from  a  mere  inefficient  and  inadequate  method  to  a  system 
of  extortionate  taxation  sanctioned  by  law. 

Its  modification  with  a  view  to  the  attainment  of  approximate  equality  would 
obviously  require  the  vesting  of  discretion  and  power  of  adjustment  as  to  rates 
or  valuation  in  a  board,  and  involve  continued  contention;  in  short,  would  con- 
tinue the  fundamental  defects  of  the  property  tax  which  progressive  thought  and 
legislation  is  seeking  to  escape.  If  adopted,  it  would  apparently  be  a  distinct 
departure  from  correct  principles. 

RAILROAD  VALUES. 

The  result  of  the  foregoing  appraisment  of  physical  and  nonphysical  values  is 
shown  as  follows: 
Cost  of  reproduction,  all  elements  new,  by  Professor  Cooley $201, 013, 081 


Cost  of  reproduction,  allowing  for  depreciation,  by  Professor  Cooley .     164, 812, 230 
Value  of  nonphysical  elements,  by  Professor  Adams 35, 988, 632 

Total  value  of  physical  and  nonphysical  elements 200, 800, 862 

The  compilation  of  these  novel  reports  in  their  detailed  forms  will  occupy  7 
volumes. 

APPRAISAL  BASED  ON  EARNING  POWER. 

Besides  the  appraisals  of  Professor  Cooley  and  Professor  Adams,  another  ap- 

graisal  of  the  values  of  railroad  properties  in  Michigan  was  prepared  by  Robert 
.  Oakinan,  one  of  the  State  tax  commissioners  in  1900.  The  values  of  the  former 
were  absolute,  no  attention  being  paid  to  the  conditions  of  operation  or  prosperity 
of  the  roads.  Mr.  Oakman's  values  were  based  chiefly  upon  the  principle  of  earn- 
ing power,  due  regard  being  given  to  such  elements  as  advantage  and  disadvan- 
tage of  location,  quality,  quantity,  market  facilities,  environment,  and  other 
conditions,  which,  while  not  susceptible  of  separate  valuations,  are  considered  as 
means  of  fixing  the  true  value  of  a  property  as  an  entirety.  Due  regard  was  also 
given  to  gross  earnings,  expenses,  stock  values,  bonded  debts,  etc. 

Mr.  Oakinan  says  in  his  report  that  the  board  "  has  found  that  in  the  markets 
of  the  world  these  properties  have  a  value  which  is  measured  mainly  by  the  income 
which  they  will  produce.  The  commercial  world,  when  it  desires  to  invest  in  stock 
and  bonds  issued  by  these  corporations,  informs  itself  about  the  earning  capacity 
of  the  properties  on  which  they  are  based.  All  its  searchlights  are  directed  upon 
their  earning  power.  Why  should  not  the  State  do  likewise?  " 


186  INDUSTRIAL    COMMISSION. 

He  also  points  out  clearly  that  the  State  board  in  the  valuation  of  these  prop- 
erties has  followed  the  mandate  of  the  law  to  ascertain  their  actual  cash  value. 

The  following  comparison  of  taxes  based  upon  Mr.  Oakman's  valuations  is 
made: 

Specific  taxes  paid  on  railroad  earnings  in  1899,  $1,240,730.90,  showing  a  rate  of 
taxation  based  upon  cash  valuations  of  $6.652  per  $1,000. 

Taxes  that  would  have  been  paid  under  the  average  rate  of  1899,  $21.13  per 
$1,000,  $3,940,985.57. 

Taxes  that  would  have  been  paid  under  average  rate  of  1900,  $15.47,  $2,885,331.13. 

What  the  average  rate  of  taxation  might  be  in  case  all  the  property  in  the  State 
were  as  completely  valued  by  the  method  applied  to  railroad  property  is  signifi- 
cantly omitted. 

Commenting  upon  the  work  of  the  commission  in  his  report,  Mr.  Oakman  says: 

"  If  railroad  property  is  to  be  assessed  and  taxed  at  cash  value  at  the  average 
rate,  and  not  specifically,  it  would,  in  my  opinion,  be  unfair  to  allow  exemptions 
or  deductions  of  other  property  in  the  State.  It  must  be  remembered  that  restric- 
tions of  rates  and  fares  of  transportation  companies  operates  as  a  tax.  Hence  all 
exemptions  of  other  property  creates  an  excess  as  against  those  incapable  of 
shifting  the  burden.  When  exemptions  are  made  or  deductions  allowed  the  total 
of  such  exemptions  or  deductions  is  thrown  upon  property  which  is  not  exempt. 

"  I  wish  to  say  that  months  before  any  law  taxing  railroads  on  an  ad  valorem 
basis  could  take  effect  there  would  be  ample  time  in  which  to  give,  these  appraisals 
a  thorough  review,  to  the  end  that  railroad  properties  would  be  assessed  and  taxed 
'  in  the  same  manner  and  to  the  same  extent '  as  other  properties  paying  taxes 
under  the  general  tax  laws  of  the  Commonwealth." 

Earning  power  is  the  keynote  of  his  valuation. 

In  the  manner  thus  briefly  set  forth  Mr.  Oakman  estimates  the  cash  value  of 
the  railroad  properties  of  the  State  to  be  $186,511,385.34. 

The  following  comments  on  "  fixing  valuations  "  are  taken  from  his  report: 

"  Having  in  mind  the  necessity  for  the  specific  examination  of  the  roads,  it  may 
be  stated  that  the  valuation  of  the  railroad  property  operated  within  the  State 
found  by  capitalizing  at  6  per  cent  the  net  earnings  of  the  revenue-producing 
roads,  figured  upon  the  system  herein  referred  to,  and  computing  the  earning 
power  of  the  roads  showing  deficits  in  operation  in  their  reports  on  the  basis  of 
the  average  ratio  of  expense  to  income  for  all  the  roads  within  the  State,  say 
73.79  per  cent,  will  reach  the  sum  of  $186,511,385.  while  the  valuation  of  the  same 
property  computed  throughout  on  a  capitalization  of  6  per  cent  upon  net  earn- 
ings, based  upon  the  said  average,  73. 79  per  cent  of  expense  to  income,  will  amount 
to  $172,154,412.  It  is  probable  that  an  examination  of  the  accounting  method  of 
the  roads  as  suggested,  and  a  further  investigation  as  to  location,  traffic  arrange- 
ments, terminals,  connections,  and  other  elements  that  go  to  make  value,  would 
result  in  a  material  increase,  or  perhaps  some  decrease  in  special  cases,  of  the 
valuations  which  appear  in  the  appendix." 
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